The Internal Revenue Service (IRS) imposed harsh penalties and big interest it never had the legal authority to charge. That is the core finding of a federal court ruling that now opens the door to refunds for tens of millions of Americans. There is one condition: you must act before July 10, 2026.
In November 2025, Judge Molly Silfen of the U.S. Court of Federal Claims issued a decision in Kwong v. United States with consequences few anticipated. The court found that tax filing and payment deadlines should have been automatically postponed from January 20, 2020, through July 10, 2023 — the full length of the COVID-19 disaster declaration — plus an additional 60 days.
IRS refunds penalties: Where do they come from?
Under that logic, many taxpayers who filed “late” during those years were never actually late. And the penalties they paid were never legitimate. The ruling builds on a 2024 U.S. Tax Court decision, Abdo v. Commissioner, which similarly held that the disaster postponement was mandatory and applied automatically.
Together, the two decisions reject the IRS’s narrower regulatory reading, which had capped pandemic relief at one year. Tax practitioners also point to the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which ended the Chevron doctrine and removed courts’ obligation to defer to federal agencies’ interpretations of ambiguous statutes — a shift that, in Kwong, favored the taxpayer.
Who qualifies, and why the number is so large
The penalties at stake include charges for missing tax filing and payment deadlines. The failure-to-file penalty is 5% of unpaid taxes per month, up to 25%. The failure-to-pay penalty is 0.5% of the outstanding balance monthly, with the same ceiling.
National Taxpayer Advocate Erin Collins — who heads the Taxpayer Advocate Service, an independent body within the IRS — has been direct about the scope of this issue. She wrote that the matter is widespread and not limited to a small or specialized group of taxpayers. Those affected include individuals, small businesses, large corporations, estates, and trusts.
The numbers behind that statement are concrete: in fiscal year 2022 alone, the IRS assessed more than 12 million estimated-tax penalties and over 16 million failure-to-pay penalties, totaling more than $12 billion. The IRS had previously refunded about $1.2 billion in penalties to roughly 1.6 million taxpayers under a narrower 2022 relief notice — but tax professionals say the legal theory in Kwong reaches far more people.
How to check whether you are owed money
The first step is reviewing your own tax history. Taxpayers should pull their IRS account transcripts and look closely at entries related to tax assessments, payments, penalty charges, interest, and account adjustments — paying particular attention to whether those dates fall within the COVID-19 disaster period, from January 20, 2020, through July 10, 2023.
Transcripts are free. You can access them by creating an account at irs.gov through the agency’s ID.me identity verification service. Paper requests are also available, though delivery typically takes five to ten business days.
The form to file — and why you cannot do it online
Eligible taxpayers need to use Form 843, “Claim for Refund and Request for Abatement.” Since the Kwong ruling has not yet become final, filers can submit what is known as a protective claim — preserving their right to a refund while the legal outcome remains unsettled. Collins recommends writing “Protective Refund Claim Pursuant to Kwong Case” across the top of the form.
There is an important technical limitation: Form 843 cannot be filed electronically. It must be submitted on paper, and the IRS does not send any confirmation of receipt. Collins recommends mailing it by certified mail, which provides legal proof of delivery in case the government later disputes whether the claim arrived on time.
The July 10 deadline does not move
Unless Congress steps in to guarantee automatic refunds for all affected taxpayers, most people seeking to recover penalties and interest paid during the COVID period will need to file their claims by July 10, 2026. Missing that date almost certainly means losing the refund permanently.
One exception is worth knowing: if a taxpayer paid penalties or interest after the disaster period ended, the two-year statute of limitations from the payment date may actually give them more time. A taxpayer who made that payment on July 1, 2025, for example, would have until July 1, 2027 — two years from payment — which falls later than the July 10, 2026 general deadline.
Sources: U.S. Court of Federal Claims (Kwong v. United States, November 2025); Taxpayer Advocate Service, blog posts by Erin M. Collins (April–May 2026); IRS fiscal year 2022–2023 enforcement data.
