Individual Protective Claims

This Insight focuses upon potential relief for 2019-2023 for Individuals and the Recovery payments (‘COVID’ payments).

A more general introduction can be found at www.seytaxgroup.com/protectiveclaim

Individual claims can potentially cover U.S. taxpayers and nonresident taxpayers, and they are not limited to ordinary income tax. The pandemic-relief theory under I.R.C. § 7508A potentially affects deadlines for federal tax returns, payments, refund claims, penalty abatements, and refund suits because § 7508A(a) applies “under the internal revenue laws” with respect to “any tax liability” of an affected taxpayer and incorporates covered time-sensitive tax acts.

But the broad COVID-period position remains disputed. The IRS has accepted only a narrower 60-day COVID postponement administratively, while taxpayer-favorable litigation arguments rely on the broader 1,268-day COVID disaster period ending around July 10, 2023. Claims relying on that broader theory should be treated as protective claims, not guaranteed refunds.

What individual taxes may be covered

Category	U.S. citizens / U.S. residents	Nonresident aliens (holders of green cards) / foreign individuals	Practical point
Federal income tax	Yes	Yes, for U.S.-source or effectively connected income reported on a U.S. return	Includes wages, business income, dividends, interest, rents, royalties, partnership income, and other taxable income.
Capital gains tax	Yes	Yes, if the gain is taxable by the United States	The pandemic rules do not erase capital gains. They may affect filing deadlines, payment deadlines, refund deadlines, penalties, or interest.
FIRPTA withholding / real estate sale refunds	Usually not applicable unless foreign status is involved	Yes, potentially	A foreign seller of U.S. real property may seek a refund if FIRPTA withholding exceeded actual U.S. tax liability; the regulations allow an early refund or refund through the income tax return process.
Estimated tax	Yes	Yes, if required to make U.S. estimated tax payments	Potential claims may involve estimated tax penalties or payment-deadline arguments.
Self-employment tax	Yes	Sometimes, depending on U.S. tax status and treaty/social security rules	Applies mainly to individuals with trade or business income.
Net investment income tax	Yes, for covered taxpayers	Generally not for true nonresident aliens	May be relevant for U.S. individuals with investment income, including capital gains.
Additional Medicare tax	Yes, where applicable	Potentially, depending on wage/self-employment tax status	Deadline and penalty issues may be affected.
Employment / household employment taxes	Yes, where the individual is an employer	Yes, if the individual has U.S. employment tax obligations	Includes household employer issues and related penalties.
Excise taxes under the Internal Revenue Code	Potentially	Potentially	Examples may include retirement-account excise taxes or other federal excise-tax liabilities. Each tax has to be reviewed separately.
Gift tax	Yes	Yes, for U.S.-taxable gifts by nonresidents	Potentially covered where a filing, payment, election, or refund deadline intersects with the disaster-relief period.
Estate tax	Applies to decedent’s estate, not the individual after death	Yes, for U.S.-situs assets of nonresident decedents	Estate-tax deadlines may be covered, but estate and transfer-tax claims are highly technical.
Generation-skipping transfer tax	Yes	Potentially	Similar to gift and estate tax; elections and allocation deadlines require careful review.
International information-return penalties	Potentially, if imposed under the Internal Revenue Code	Potentially	These are more technical and more disputed. Claims involving information-return penalties should be treated cautiously.
FBAR penalties	Generally no under this theory	Generally no under this theory	FBAR penalties arise under Title 31, not the Internal Revenue Code, so they should not be assumed to be covered by § 7508A.

What penalties and interest may be covered

Potentially covered penalty and interest issues include:

• late-filing penalties;
• late-payment penalties;
• estimated tax penalties;
• failure-to-deposit penalties, where an individual or business has employment tax obligations;
• information-return penalties imposed under the Internal Revenue Code;
• penalty and interest accruals tied to deadlines falling within the COVID disaster period;
• refund-claim deadlines;
• refund-suit deadlines;
• claims for the amount of a credit or refund, which § 7508A(a)(3) expressly covers.

The key limitation is that § 7508A is mainly a deadline and timing statute. It generally does not cancel the underlying tax. For example, it does not make a capital gain nontaxable and does not eliminate FIRPTA withholding merely because the sale occurred during the pandemic. It may, however, preserve a refund claim, abatement claim, or lawsuit deadline that otherwise would be treated as late.

U.S. taxpayers versus nonresident taxpayers

U.S. citizens and U.S. residents

For U.S. citizens and U.S. resident aliens, the potential claim universe is broad. It can include:

• individual income tax;
• tax on capital gains;
• estimated tax penalties;
• self-employment tax;
• net investment income tax;
• additional Medicare tax;
• recovery rebate credit issues for 2020 and 2021;
• gift tax;
• estate-related filings for fiduciaries or estates;
• penalties and interest tied to late filings or payments;
• refund-claim or refund-suit deadlines.

Nonresident aliens

For nonresident aliens, the claim universe is narrower but still meaningful. It may include:

• U.S. income tax on effectively connected income;
• U.S. tax on certain U.S.-source income;
• FIRPTA refunds from U.S. real property sales;
• withholding-tax refund claims;
• U.S. estate tax on U.S.-situs assets;
• U.S. gift tax on certain transfers of U.S. property;
• penalties and interest associated with those U.S. tax obligations.

For FIRPTA specifically, if the amount withheld exceeds the foreign transferor’s maximum tax liability, the transferor may seek an early refund of the excess or a normal refund when filing the applicable return. If the stamped withholding statement is unavailable, the transferor may use substantial evidence such as closing documents, but must provide the required identifying information. Nonresident individuals and foreign corporations claiming refunds from withholding must also include a taxpayer identification number and report the full amount of income subject to U.S. tax, even if withholding fully satisfied the tax.

Are 2020 and 2021 pandemic recovery payments still possible if no return is filed before July 10, 2026

Possibly for U.S. citizens and U.S. resident aliens (holders of green cards) — but only as a protective, disputed position if no return was filed before then. It should not be presented as an automatic or IRS-conceded refund.

1. Ordinary IRS position: likely no for many late filers

The 2020 and 2021 pandemic recovery payments were claimed through the Recovery Rebate Credit:

• 2020 return: first and second recovery payments.
• 2021 return: third recovery payment.

For taxpayers who never filed 2020 or 2021 returns, the ordinary refund deadlines have generally passed. Under I.R.C. § 6511(a), a refund claim generally must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever expires later; if no return was filed, the claim generally must be filed within 2 years from payment. No credit or refund is allowed after the limitation period unless a timely claim was filed.

The practical problem is the lookback rule. Even if a late original return filed on July 8, 2026 functions as a refund claim, the amount refundable may be limited by whether the relevant credit or deemed payment falls within the lookback period. Under the IRS’s narrow 60-day COVID-relief position, many 2020 and 2021 recovery-credit claims filed that late would likely be denied.

2. Protective taxpayer position: possibly yes if filed before July 10, 2026

A taxpayer-favorable argument exists because the broad COVID-relief theory treats the COVID disaster period as a much longer disregarded period, commonly measured as 1,268 days, ending around July 10, 2023. The attached materials identify the administrative window for many protective COVID-based claims as closing around July 10, 2026.

That matters because later legislation provides that, for purposes of the § 6511(b)(2)(A) lookback rule, certain § 7508A disregarded periods are treated as extensions of time for filing the return for claims filed after December 26, 2025. The same authority cautions, however, that this legislation does not extend the separate § 6511(a) two-year-from-payment filing period.

So, if a U.S. citizen or resident who was otherwise eligible for the Recovery Rebate Credit files 2020 and/or 2021 returns before July 10, 2026, the taxpayer may have a protective argument that the claim is still viable under the full COVID-period theory. The IRS may deny it administratively, and the taxpayer may need to preserve litigation rights.

Bottom line

For individual taxpayers, the pandemic-relief claim category can potentially cover income tax, capital gains, estimated tax penalties, self-employment tax, certain employment taxes, excise taxes, FIRPTA withholding refunds, estate tax, gift tax, GST tax, and related penalties and interest. It does not automatically forgive the tax; it may preserve claims affected by pandemic-era deadline rules.

For 2020 and 2021 recovery payments, a return first filed before July 10, 2026 may still be worth evaluating for an eligible U.S. citizen or resident alien, but only as a protective, disputed claim under the broader COVID-period theory. It is generally not available to true nonresident aliens (holders of green cards) for years when they were nonresident aliens. Because many protective claims are being measured against a July 10, 2026, deadline, the review should be completed well before that date.

What to Do

Taxpayers with meaningful penalties, interest, missed recovery payments, business tax overpayments, capital gain reporting issues, payroll tax liabilities, excise tax liabilities, estate or gift tax issues, or unresolved pandemic-era IRS notices should act now.

For many pandemic-era protective claims, July 10, 2026, is the critical filing deadline. Some claims tied to later payments may have different deadlines, including shorter two-year deadlines measured from the payment date. That means a taxpayer should not wait until July 2026 to begin the review.

Contact us promptly if you want to evaluate whether a protective claim should be filed. The next step is a transcript and deadline review, followed by a carefully drafted claim that preserves all available arguments while clearly acknowledging that the broader pandemic-relief position remains disputed.

Contact us today.

We have over 14 years’ experience bringing U.S. taxpayers into compliance.  We are accredited in Ireland (tax advisor) and United States (CPA, tax attorney) with offices in Dublin (Ireland) and New York.

You can contact us at

• Enquiry Submission Link
• www.seytaxgroup.com
• info@seytaxgroup.com
• Irish Office:
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  • Morrison Chambers
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  • Tel         (01) 6834100
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All this information (above) is not specific to your facts and circumstances and must not be relied upon. None of this information (above) is advice. This communication does not constitute any form of legal or contractual or any other relationship. You should always seek specific advice from a competent professional having made a full disclosure of all pertinent, or material, facts, or information.