As a small business owner, you’ve probably spent more time worrying about what you owe the IRS than wondering whether the IRS owes you money.
But two recent court filings have created a potential refund opportunity that could impact millions of businesses and taxpayers who paid IRS penalties and interest during the COVID-19 pandemic.
If your business was charged late-filing penalties, late-payment penalties, estimated tax penalties, or certain interest charges between 2020 and 2023, you may be entitled to recover some or all of those payments. However, there is an important catch: you must act before July 10, 2026, to preserve your rights. Recent guidance from the National Taxpayer Advocate warns that many taxpayers may lose the opportunity entirely if they fail to file claims before the deadline.
For many entrepreneurs who struggled with shutdowns, supply chain disruptions, labor shortages, inflation, and economic uncertainty, this could be an unexpected source of cash for their businesses.
What Happened?
During the COVID-19 pandemic, the federal government declared a national emergency that lasted from January 20, 2020, through May 11, 2023.
During that period, the IRS extended many tax filing and payment deadlines under federal disaster relief rules. However, two recent federal court decisions, Abdo v. United States & Kwong v. United States, questioned whether the IRS had authority to continue assessing certain penalties and interest throughout the entire disaster period. Several tax experts and legal analysts believe the ruling could entitle millions of taxpayers to refunds or abatements of penalties and interest assessed during those years.
While the IRS is challenging the decision and the legal process is still unfolding, tax professionals across the country are encouraging taxpayers and business owners to file protective claims before the deadline to preserve their rights. (MarketWatch)
Why Small Business Owners Should Pay Attention
Many business owners were hit with penalties during the pandemic years for reasons that were beyond their control.
Businesses faced:
- Mandatory shutdowns
- Supply chain disruptions
- Staffing shortages
- Cash flow challenges
- Delayed bookkeeping and accounting
- Unpredictable operating conditions
As a result, many business owners incurred penalties for late filing, late payment, or failure to meet estimated tax obligations. At the time, most entrepreneurs simply paid the penalties and moved on because they were focused on keeping their businesses alive. Now, it is possible that some of those penalties should never have been assessed in the first place.
For business owners who paid thousands, or even tens of thousands, of dollars in penalties and interest, the refund opportunity could be significant.
How Much Money Are We Talking About?
The answer depends entirely on your tax history. Some businesses may only qualify for a few hundred dollars. Others may be entitled to several thousand dollars.
Businesses that experienced significant tax liabilities during the pandemic could potentially recover much larger amounts. The important thing to understand is that refunds are not automatic. The IRS is not currently sending checks to everyone who may qualify. Most taxpayers and business owners must take action to preserve their rights before the filing deadline.
Why You Shouldn’t Wait
Many entrepreneurs make the mistake of assuming they will “look into it later.” That approach could be costly. According to tax professionals and the National Taxpayer Advocate, many refund claims are subject to a statute of limitations deadline of July 10, 2026. Missing that deadline could mean permanently losing the ability to recover funds, even if future court decisions ultimately confirm taxpayers are entitled to refunds.
In other words, waiting until the legal process is finished may leave you with no ability to participate. The smartest approach is to determine whether you may qualify and preserve your rights before the deadline passes.
Who May Be Eligible?
You may want to investigate further if your business:
- Paid IRS penalties between 2020 and 2023
- Paid interest on tax balances during the COVID emergency period
- Received notices for late filing or late payment penalties
- Incurred estimated tax penalties
- Experienced pandemic-related business disruptions
- Entered payment plans with the IRS during the pandemic years
Even if you’re unsure whether you qualify, it is worth exploring.
Many business owners have no idea what penalties they paid during those years because the amounts were simply added to IRS balances and paid automatically through installment agreements or tax settlements.
How Can You Find Out?
The good news is that you don’t have to become a tax attorney to investigate your eligibility.
One of the easiest ways to determine whether your business may qualify is to request a review of your IRS records and penalty history.
That’s why the team at IRSPenaltyback.com developed a process to help business owners quickly determine whether they may be eligible for a refund.
The review is designed to help identify whether penalties and interest assessed during the COVID-era disaster period may qualify for a refund claim.
Best of all, the initial eligibility review is free. Visit IRSPenaltyback.com to see what you could be owed.
Why This Matters for Small Business Growth
Too often, entrepreneurs leave money on the table simply because they don’t know opportunities exist.
Imagine what an unexpected refund could do for your business.
You might use it to:
- Hire staff
- Upgrade technology
- Improve marketing
- Increase cash reserves
- Invest in growth initiatives
- Pay down debt
For many small businesses, every dollar matters.
Recovering funds that may have been improperly assessed could provide a welcome financial boost at a time when many entrepreneurs are still navigating economic uncertainty.
Take Action Before July 10, 2026
If your business paid IRS penalties or interest during the pandemic years, now is the time to investigate whether you may qualify for a refund.
The legal landscape is still evolving, and refunds are not guaranteed. However, many tax professionals agree that preserving your rights before the July 10, 2026, deadline is a prudent step for potentially affected taxpayers.
Don’t assume you don’t qualify.
Don’t assume the IRS will contact you.
And don’t wait until the last minute.
Visit IRSPenaltyback.com today for a free eligibility review and find out whether the IRS may owe your business money.
You worked hard to survive one of the most challenging periods in modern business history. If there is an opportunity to recover funds your business may be entitled to receive, it is worth taking a few minutes to find out.
This is a sponsored article, but the content of this post is the opinion of the author of this blog.
About the Sponsor:
IRSPenaltyback.com helps business owners determine whether they may qualify for refunds of IRS penalties and interest assessed during the COVID-19 pandemic period.
The company is led by Kenny Dettman, Co-Founder and CEO, a CPA with nearly 20 years of experience. IRSPenaltyBack.com reviews each business’s situation, identifies potential refund eligibility, and guides clients through the claim process from start to finish. With the July 10, 2026 deadline approaching, business owners should consider checking whether the IRS may owe them money. Reviews are free, and there is no obligation to move forward.
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