The IRS may owe you money from the pandemic era — and if you don't act soon, you could miss out. Following a landmark federal court ruling in Kwong v. United States, tens of millions of American taxpayers could be entitled to refunds or abatements on penalties and interest the IRS charged during the COVID-19 national disaster period. But with the Justice Department appealing the decision and a fast-approaching July 10, 2026 deadline to file claims, time is running out to secure what could be a significant refund.
How the Kwong Ruling Unlocked COVID-Era IRS Refunds
The National Taxpayer Advocate, an independent watchdog within the IRS, issued an urgent alert in late April 2026 revealing that the Kwong v. United States decision has opened the door for widespread refund claims. The court found that because the federal COVID-19 disaster declaration lasted from January 20, 2020 through May 11, 2023 — with tax filing and payment deadlines postponed through July 10, 2023 — the IRS incorrectly assessed penalties and interest during that extended period.
"By the court's logic, the IRS should not have assessed penalties for late filing or payment during that 3.5-year period, nor charged interest on those amounts," the National Taxpayer Advocate explained in an official blog post. The ruling affects a broad swath of taxpayers — individuals, small businesses, large corporations, estates, and trusts — across income, employment, estate, gift, and excise taxes.
Timeline: How the COVID-Era Refund Opportunity Developed
The story of these potential refunds spans more than six years, from the early days of the pandemic to the present moment. Here are the key milestones:
- January 20, 2020: The federal government declares a national COVID-19 disaster, beginning the period that would become central to the Kwong ruling.
- March-April 2020: The IRS postpones tax filing and payment deadlines as the pandemic disrupts normal operations nationwide.
- January 2020 - May 2023: During this 3.5-year disaster period, millions of taxpayers file late or pay late, incurring IRS penalties and interest — charges the Kwong decision says should not have been assessed.
- May 11, 2023: The COVID-19 national emergency ends, though tax deadline postponements extended to July 10, 2023.
- November 2025: The Kwong v. United States ruling determines that the IRS's handling of disaster declarations meant filing and payment deadlines were effectively postponed throughout the full disaster period.
- April 30, 2026: The National Taxpayer Advocate publishes its high-profile warning, urging taxpayers to file claims by July 10, 2026.
- May 2026: News outlets nationwide pick up the story as the deadline approaches, with the IRS yet to announce systematic relief.
The July 10, 2026 deadline stems from the standard three-year window for filing refund claims from the date a return was originally filed — which, for many COVID-era filings, points back to the July 2023 end of the postponement period.
Who Qualifies and What Can Be Recovered
The Taxpayer Advocate Service estimates this applies to tens of millions of taxpayers. Specifically, the following types of IRS charges during the COVID disaster period may qualify for refund or abatement:
- Penalties for failure to timely file returns — If you filed late between January 2020 and July 2023 and were penalized
- Penalties for failure to pay taxes on time — Including payments made after original deadlines
- Penalties for failure to make estimated tax payments — Quarterly payments you missed or underpaid
- Interest that began accruing — Any interest charged on these improperly assessed penalties
- Overpayment interest — For the 2020-2023 disaster period
It's important to note that the relief is not automatic. The IRS has not announced any systemic processing of these refunds, and the Justice Department is actively appealing the Kwong decision. This places the burden squarely on individual taxpayers to file protective claims if they want to preserve their rights.
"Because of the infrequency of a disaster lasting this long, most taxpayers, even most tax professionals, did not foresee that filing deadlines and payments deadlines would be postponed for this long," the Taxpayer Advocate wrote, explaining why millions may have paid penalties they shouldn't have.
How to File a Claim Before the July 10 Deadline
Filing a claim requires using IRS Form 843, "Claim for Refund and Request for Abatement." The form must be submitted as a paper filing — the IRS does not yet offer electronic submission for these claims.
The National Taxpayer Advocate recommends these critical steps:
- Write "Protective Refund Claim Pursuant to Kwong Case" or similar language across the top of Form 843 to ensure it's properly identified
- Fill in as much detail as possible about the penalties and interest you paid
- Send by certified mail with return receipt requested — this provides proof of timely filing in case the form is lost
- Keep copies of everything you submit
The form can request either a refund of amounts already paid or an abatement (reduction or elimination) of amounts the IRS says you still owe. Most taxpayers will need to file by July 10, 2026, though the exact deadline may vary depending on individual filing dates.
The Taxpayer Advocate has called on the IRS to take four proactive steps: publicizing the issue widely, providing a six-month filing extension for refund claims, considering systemic relief so taxpayers don't have to file individually, and creating an electronic submission portal. So far, none of these have been implemented.
Where Things Stand Now
As of May 2026, the situation remains fluid. The Kwong appeal is pending, and the IRS has not announced any automatic relief or streamlined process for affected taxpayers. This means that for now, the only way to guarantee your eligibility is to file a protective claim before the deadline.
Tax professionals and accountants are widely recommending that clients who paid any COVID-era penalties file Form 843 by July 10 as an insurance policy. If the Kwong ruling is ultimately upheld on appeal, those who filed protective claims will be first in line for refunds. If the ruling is reversed, the claims simply won't be processed — but taxpayers who didn't file will have no recourse.
"Unless the IRS or Congress acts to ensure all affected taxpayers will receive refunds if the Kwong decision is upheld, taxpayers seeking refunds for penalties and interest they paid relating to that period will, in most cases, need to file claims by July 10, 2026," the National Taxpayer Advocate warned.
What Happens Next: The Road Ahead for COVID-Era Refunds
The coming months will be pivotal. If the Justice Department's appeal succeeds, the refund opportunity could vanish entirely. But if the Kwong ruling stands, we could see one of the largest mass tax refund events in IRS history — potentially returning billions of dollars to tens of millions of taxpayers.
Congress could also step in to provide legislative relief, which might extend deadlines or mandate automatic processing. However, no such legislation has been introduced as of this writing. The Taxpayer Advocate has urged members of Congress to highlight the issue in communications with constituents, suggesting that bipartisan interest in taxpayer relief could emerge.
For investors and financially savvy individuals, this is a rare and time-sensitive opportunity. Even if the amounts at stake are modest for your specific situation, the cost of filing Form 843 is minimal — just the postage for certified mail — while the potential upside could be significant.
The Bottom Line: Key Points to Remember
- Tens of millions of taxpayers may be eligible for refunds on COVID-era IRS penalties and interest
- The Kwong v. United States court ruling is the legal basis, but the IRS is appealing
- File Form 843 by July 10, 2026 to preserve your claim — most refunds are not automatic
- Use certified mail and write "Protective Refund Claim Pursuant to Kwong Case" on the form
- Consult a tax professional if you had complex filings during the COVID period
As the National Taxpayer Advocate put it: "At the risk of repetition, my overriding goal is to get the word out to as many taxpayers as possible and to avoid disparate results between the 'well advised' and the 'unaware.'" Don't let that be you.
