Proactive Tax Strategy: Are You Owed a COVID-Era Penalty Refund?

The operational disruptions of the pandemic forced many small and mid-size businesses to adjust their financial routines on the fly. During that window, filing deadlines shifted, IRS processing stalled, and some companies inevitably faced late payment or late filing penalties.

Now, a recent federal court decision is raising a critical question: Did the IRS improperly assess certain penalties and interest between January 2020 and May 2023?

More importantly, could your business recover that capital?

The Legal Ruling and Your Cash Flow

At Lizza & Carullo CPAs & Advisors, we constantly look for ways to optimize your financial structure and improve cash flow. This recent court ruling centers on disaster relief rules that automatically postpone specific tax deadlines during federally declared emergencies.

Because the federal COVID disaster declaration spanned over three years, the court determined that filing and payment deadlines within that period may have been legally extended far beyond what was initially understood.

For businesses that paid late filing penalties, late payment penalties, or related interest charges during those years, those assessments might have been invalid. This opens the door for potential refunds—capital that can be redirected back into your daily business operations.

Business advisors consulting on tax strategy

Planning Ahead: The Protective Refund Claim

We believe in planning ahead rather than reacting to financial surprises. While the government is expected to appeal this decision, business owners cannot afford to wait for the final gavel. The statute of limitations for filing a refund claim is rapidly approaching, with a critical deadline of July 10, 2026, for many taxpayers.

If you miss this window while the case works its way through the appeals process, you permanently forfeit your right to recover those funds, even if the courts ultimately side with business owners.

Gain Year-Round Financial Clarity and Confidence
Partner with Lizza & Carullo CPAs & Advisors for ongoing guidance, proactive tax planning, and strategic financial support. Whether you’re growing a business or navigating personal taxes, our year-round advisory approach helps you stay organized, tax-efficient, and in control — with a team that’s here when you need us, not just at tax time.
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To mitigate this risk, we advise affected clients to consider filing a "protective refund claim." This does not guarantee an immediate check from the IRS, but it firmly secures your place in line, preserving your right to a refund if the broader deadline relief is upheld.

Who Should Review Their Tax History?

This opportunity spans multiple tax years and entity structures. You should evaluate a protective claim if you or your business:

  • Filed tax returns late during the pandemic

  • Absorbed late payment penalties or entered into an installment agreement

  • Paid significant IRS interest charges between 2020 and 2023

  • Operate a multi-entity structure or real estate portfolio that incurred compliance delays

Solving the financial puzzle for businesses

Current IRS guidance generally requires these protective claims to be submitted via paper filing. While dealing with paper forms is a far cry from the modern, clean financial systems we build for our clients, the potential recovery of capital makes the effort well worthwhile.

Gain Clarity on Your Next Steps

Sound tax strategy is about looking forward and making decisions with reliable data. If your East Rutherford or nationwide business absorbed IRS penalties tied to COVID-era delays, proactive review is essential.

Contact Lizza & Carullo CPAs & Advisors today. We can help review your tax history, determine if a protective refund claim aligns with your broader financial structure, and ensure you do not miss out on recovering valuable capital before the deadline passes.

Gain Year-Round Financial Clarity and Confidence
Partner with Lizza & Carullo CPAs & Advisors for ongoing guidance, proactive tax planning, and strategic financial support. Whether you’re growing a business or navigating personal taxes, our year-round advisory approach helps you stay organized, tax-efficient, and in control — with a team that’s here when you need us, not just at tax time.
Schedule Your Discovery Call
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