Somewhere buried in your tax records from the pandemic years, the IRS may be holding money that belongs to you. The agency collected billions of dollars in penalties and interest from taxpayers who filed or paid late between 2020 and 2023, a period when the country was struggling to meet basic financial obligations.
A federal court ruling from late 2025 now suggests that many of those charges were never legally justified in the first place. The Kwong ruling builds on a similar 2024 U.S. Tax Court decision, Abdo v. Commissioner, which reached a parallel conclusion on a related question about Section 7508A(d).
Together, the two decisions establish that the postponement provision applies automatically and is not constrained by IRS administrative guidance. But here is the part that should grab your attention: The government will not send you a check on its own.
The window to claim a refund closes on July 10, 2026, and the National Taxpayer Advocate is sounding the alarm to reach eligible Americans before the deadline passes.
Court ruling in Kwong v. United States could erase billions in IRS penalties
The refund opportunity traces back to the November 2025 decision in Kwong v. United States, decided by Judge Molly Silfen of the U.S. Court of Federal Claims.
The court concluded that a federal tax code provision automatically suspended filing and payment deadlines for the entire Covid federal disaster period, which ran from Jan. 20, 2020, through May 11, 2023, plus a 60-day statutory extension that pushed the postponement period through July 10, 2023.
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Under the court’s interpretation, the IRS lacked legal authority to charge late-filing penalties, late-payment penalties, or underpayment interest for any tax obligation due during that 3.5-year window. Ivan H. Golden, a partner at the Taft law firm in Chicago, wrote that the case has gained traction as tax practitioners recognize its sweeping scope and the approaching refund deadlines, according to Taft Law.
In fiscal year 2022 alone, the IRS levied more than 12 million estimated-tax penalties and upward of 16 million failure-to-pay penalties, totaling more than $12 billion in assessed charges, though some were later reduced or removed, National Taxpayer Advocate Erin Collins noted in an April 30, 2026, blog post on the Taxpayer Advocate Service website.
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Not every penalty falls within the reach of the Kwong ruling, but the sheer volume illustrates the scale of the potential refund pool. While potential refunds are significant, the process remains uncertain and uneven for taxpayers.
The IRS has not fully embraced the ruling or broadly notified affected individuals. Paper filing requirements and limited outreach create barriers that may prevent eligible claims. The situation shows how crisis policies can leave unresolved issues long after emergencies end.
The pandemic stretched tax rules beyond their original purpose and exposed gaps. The ruling highlights tensions between law, implementation, and communication across large-scale disruptions.
How the Covid disaster declaration created this tax refund window
When Covid struck, a nationwide disaster declaration triggered automatic protections under Internal Revenue Code Section 7508A(d). That provision was originally designed for natural disasters such as hurricanes and wildfires, pausing tax deadlines for the length of a declared emergency. The pandemic, however, lasted far longer than any previous federally declared disaster.
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The IRS maintained during the pandemic that its own administrative guidance controlled how long deadline relief lasted, offering taxpayers only brief postponement windows. The Kwong court rejected that approach, holding that the statute itself determined the scope of relief, CohnReznick explained.
Any tax return or payment due between Jan. 20, 2020, and July 10, 2023, may not have been legally late, covering tax years 2019 through portions of 2022.
Filing Form 843 is the only path to claiming your IRS refund
Claiming money under the Kwong ruling requires mailing a paper Form 843, Claim for Refund and Request for Abatement, directly to the IRS. There is no electronic filing option for this form, creating a significant barrier for the millions of eligible taxpayers who may never learn about the process.
“Taxpayers who paid meaningful penalties or interest during the period should consider reviewing their transcripts and speaking with their advisors about whether a protective refund claim makes sense,” Mark Gallegos, partner at Porte Brown in Elgin, Illinois, told Yahoo Finance.
Taxpayers should not expect automatic notices or surprise refund checks, he added. “The significance is that a taxpayer-favorable court interpretation has created a possible path to challenge certain COVID-era penalties and interest.”
Types of IRS charges that may qualify for a refund under Kwong
- Failure-to-file penalties assessed for returns due between Jan. 20, 2020, and July 10, 2023, covering tax years 2019 through 2022, the Taxpayer Advocate Service confirmed
- Failure-to-pay penalties, which are charged at the standard rate of 0.5% of the unpaid tax for each month they remain unpaid, according to the IRS
- Estimated tax underpayment penalties levied against individuals, estates, and businesses during the covered period, Thomson Reuters noted
- Interest charges that began accruing based on original due dates within the disaster window, which may have been improperly calculated, Grant Thornton analysts explained
Protective claims can preserve your IRS refund rights while legal battles continue
The Department of Justice is widely expected to appeal the Kwong decision, meaning the legal landscape remains unsettled and could take years to resolve. Tax professionals are advising clients to file a protective claim, a procedural filing that preserves the right to a refund without requiring a precise dollar amount upfront.
A protective claim freezes the statute of limitations for a specific account, ensuring that if the standard deadline expires during the appeal, the taxpayer retains eligibility for a refund if Kwong is upheld.
Gallegos told Yahoo Finance that refund claims are governed by strict statute-of-limitations rules, and practitioners have identified July 10, 2026, as the critical filing date.
Low-income taxpayers face greatest risk of missing IRS refund deadline
Collins raised pointed concerns about who stands to lose the most if awareness remains low. She wrote that many affected taxpayers earn low or moderate incomes and are far less likely to have professional tax representation or to learn about complex legal developments such as the Kwong ruling.
The Taxpayer Advocate has called on the IRS to proactively notify affected taxpayers, grant a six-month extension of the filing deadline, provide blanket relief that eliminates the need for individual claims, and build an electronic portal for Form 843 submissions.
None of those steps has been implemented as of early May 2026, and Collins framed the stakes plainly: Her overriding goal is to ensure that well-advised taxpayers and unaware taxpayers reach the same outcome.
