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An IRS refund denial letter does not always end a COVID-related tax claim, but it can start a deadline that keeps running while you dispute the decision. First identify the letter, the tax period, and whether it formally disallows your claim. Then separate your response options from the deadline for bringing a refund lawsuit.
- A full denial and a partial denial affect different portions of a claim.
- Continuing discussions with the IRS generally does not pause the refund-suit clock.
- Pending COVID-related litigation does not guarantee a refund or automatically preserve your rights.
- Keeping the original claim, mailing records, and notices together helps clarify the next step.
Why are COVID-related refund claims being denied?
According to the Journal of Accountancy, in October 2026, taxpayers with claims connected to the Kwong litigation were receiving denial and no-consideration letters while the legal dispute remained unresolved. The National Taxpayer Advocate asked the IRS to reconsider its handling of those claims.
The underlying issue concerns whether COVID disaster-relief provisions postponed certain tax deadlines. That could affect potential relief from penalties and interest, but a pending case is not the same as a final determination that a particular taxpayer qualifies.
A request to pause denials is also not an enacted pause. For someone holding a letter, the practical question is what that specific document does to the claim and what deadlines remain in effect.
Is this a new opportunity to file?
This discussion primarily concerns people who already submitted claims. The Taxpayer Advocate Service explained in May 2026 that July 10, 2026, was the generally applicable filing date discussed for many potential Kwong claims, although later payments could affect the deadline in individual cases.
Receiving a denial does not create a fresh original filing period. Whether a claim was timely and whether the underlying legal argument succeeds are separate questions requiring the taxpayer’s actual filing and payment records.
What kind of IRS refund denial letter did you receive?
The Taxpayer Advocate Service describes Letter 105C as a full disallowance of a claimed credit or refund. Letter 106C concerns a partial disallowance, meaning the IRS has not accepted everything requested.
A letter saying the IRS will not consider a submission needs its own review. Do not assume that every unfavorable response has the same legal effect as a statutory notice of disallowance.
| Document | What to examine | Why it matters |
|---|---|---|
| Letter 105C | The denial reason and the tax period covered | The entire identified claim has been rejected |
| Letter 106C | The portion allowed and the portion rejected | The disagreement may concern only part of the request |
| No-consideration correspondence | The precise explanation and any response instructions | Its procedural effect needs confirmation rather than an assumption |
Also distinguish a refund of money already paid from removal of an unpaid assessment, known as abatement. The Taxpayer Advocate Service explains that these are different procedural situations, even when both involve penalties or interest.
How can you respond if you disagree?
For Letters 105C and 106C, the Taxpayer Advocate Service describes a written response explaining the disagreement and supplying supporting documents. The response goes to the IRS office that issued the letter, following the notice’s instructions.
If that office does not accept the explanation, the taxpayer can request referral to the IRS Independent Office of Appeals. The appropriate request format depends on the case and the applicable instructions; a generic complaint may not address the actual denial reason.
- Match the notice to the original claim and relevant tax period.
- Identify the specific reason the IRS gave for rejecting it.
- Collect the filed claim, payment evidence, transcripts, and proof of mailing.
- Explain the disagreement using those records and the applicable legal basis.
- Keep a complete copy of the response and evidence of delivery.
For COVID-related penalty and interest claims that do not change underlying income-tax liability, TAS generally points to Form 843. That does not mean every denial calls for another Form 843: first establish what was filed and what the notice requests.
Does an appeal stop the deadline to sue?
Generally, no. A statutory notice of claim disallowance ordinarily starts a two-year period for filing a refund lawsuit, measured from mailing of the notice.
The Taxpayer Advocate Service warned in April 2022 that administrative review does not itself preserve the ability to receive a refund after the limitation period expires. An encouraging conversation or a pending Appeals review is not a substitute for protecting that deadline.
What does Form 907 change?
Form 907 provides a way for the taxpayer and IRS to agree to extend the period for bringing suit. Sending a request is not enough: the agreement needs the required IRS approval and signature before the existing period expires.
Without an effective extension, a timely refund lawsuit may be necessary to preserve rights. The usual forums are federal district courts and the Court of Federal Claims. A tax professional familiar with refund litigation can assess which court is appropriate, the procedural requirements, and costs.
How can you manage your budget while the claim is unresolved?
A disputed refund is uncertain money, not a confirmed payment date. Separating ordinary bills from the expected proceeds reduces the risk of making commitments that depend on a favorable outcome.
For the cash-flow side, our explanation of using a weekly plan to manage money offers a way to organize near-term spending. It does not replace tracking the tax deadlines separately.
Our guide to when an emergency fund becomes especially important also covers the role of accessible savings when incoming money is uncertain. Neither approach determines whether the IRS claim is valid.
Before paying for assistance, ask what work is included, whether refund litigation is covered, and how fees are charged. Preserving a potentially valid claim and pursuing an economically sensible dispute are related but different decisions.
Frequently Asked Questions
No. It means the IRS has rejected the identified claim, but options may include submitting a documented disagreement, seeking Appeals review, or pursuing a timely refund lawsuit. The available route depends on the facts and deadlines. A denial is neither automatic proof that the claim lacked merit nor a promise of eventual payment.
Waiting without checking your own deadlines can put the claim at risk. Pending litigation does not generally stop the period triggered by a statutory disallowance notice. Review the letter and determine whether an effective extension or another protective step is needed while the broader legal questions remain unresolved.
No. A request alone does not extend the deadline. The taxpayer and IRS must enter an effective agreement, including the required IRS signature. Until that is completed, the existing deadline remains important. A professional can help assess what to do if the requested extension is still pending as time runs short.
No. Potential relief depends on the legal outcome, the taxpayer’s circumstances, and compliance with filing and procedural requirements. The dispute concerns possible treatment of penalties, interest, and deadlines, not an automatic payment to everyone who filed during the pandemic. Marketing that promises a definite refund overlooks those unresolved issues.
Informational content only, not financial advice.
