Tens of millions of taxpayers who paid IRS penalties or interest during the COVID-19 pandemic period face a hard deadline of July 10, 2026, to file claims for refunds or abatements. The clock is ticking because of a federal court ruling in Kwong v. United States, which found that a section of the tax code automatically postponed certain filing and payment deadlines for more than three years, from January 20, 2020, through July 10, 2023. The National Taxpayer Advocate has warned that taxpayers who fail to act before that date risk losing their right to recover money the government collected during what the court deemed a mandatory relief window.
Why the July 10 deadline changes the penalty math
The core of the dispute is whether the IRS was legally permitted to assess late-filing penalties, late-payment penalties, and interest during the COVID-19 disaster period. In its opinion in Kwong, the U.S. Court of Federal Claims ruled that IRC Section 7508A(d) created a mandatory postponement period tied to the federal disaster declaration. The court determined that this period ran from January 20, 2020, through July 10, 2023, including an additional 60 days built into the statute. Under that reading, penalties and interest that accrued during the postponement window should not have been imposed at all.
That interpretation collides with how the IRS actually operated. The agency used its discretionary authority to grant narrower relief windows for specific tax years, leaving many taxpayers on the hook for penalties tied to returns and payments due during the broader disaster period. The gap between the court’s automatic-relief reading and the government’s narrower view is what creates the refund opportunity and, simultaneously, the urgency. Taxpayers who believe they were penalized during the covered window generally must file protective claims before the three-year refund statute expires on July 10, 2026.
The National Taxpayer Advocate has emphasized that the ruling potentially affects a vast population of filers, including individuals, small businesses, and employers who made payroll deposits during the pandemic. According to a recent blog post from the office, tens of millions of taxpayers may have paid penalties or interest that are now subject to challenge. However, the IRS has not announced a broad automatic relief program tied to Kwong, which means the burden is on taxpayers to come forward.
Who qualifies and what kinds of charges are at stake?
Eligibility turns on timing and type of assessment. The key question is whether penalties or interest were imposed for failing to file or pay during the disaster postponement period as interpreted by the court. That can include late-filing additions to tax, late-payment penalties, and interest that ran while deadlines were deemed suspended. It may also reach certain information-return penalties or other time-sensitive charges if they arose from obligations that fell within the covered dates.
Taxpayers who filed late returns, made late payments, or entered into installment agreements between 2020 and mid-2023 should review their IRS account transcripts and notices. For many, the amounts at stake may be a few hundred dollars; for others, especially businesses with payroll or excise liabilities, the figures could be far larger. The National Taxpayer Advocate has urged taxpayers not to assume that small balances are not worth pursuing, particularly if multiple tax years are involved.
Importantly, Kwong does not change the underlying tax itself. The ruling concerns the timing rules that govern when returns and payments are due and whether penalties and interest can run while those deadlines are postponed. Taxpayers still owe properly assessed tax, but they may be entitled to refunds or abatements of related charges if those assessments fell within the mandatory postponement window.
How to file a claim before July 10, 2026
The primary vehicle for penalty and interest claims is IRS Form 843, which is used to request refunds or abatements of certain penalties, interest, and fees. Form 843 is not used to amend income-tax returns themselves; changes to reported income, deductions, or credits generally require an amended return such as Form 1040-X. For Kwong-related issues, the focus is on reversing or refunding charges that were assessed when deadlines should have been postponed.
The practical first step for any taxpayer who paid a late-filing or late-payment penalty or significant interest during the 2020–2023 period is to gather IRS notices and account transcripts for the affected years. Those documents show when the IRS assessed penalties and interest and on what basis. Taxpayers should identify each charge that appears connected to an obligation falling within the January 20, 2020, through July 10, 2023, disaster window.
When completing Form 843, taxpayers should clearly state that the claim is being filed in light of the Kwong v. United States decision and the operation of IRC Section 7508A(d). The form allows space to describe the type of penalty or interest, the tax period involved, and the legal grounds for the request. Taxpayers can file multiple claims if more than one tax year is affected, but each claim must be timely under the refund statute of limitations, which for many will close on July 10, 2026.
Because the IRS has not yet issued comprehensive public guidance on how it will process Kwong-related claims, many practitioners are recommending that taxpayers file “protective” claims. A protective claim preserves the right to a refund while legal or administrative questions are still being resolved. Even if the IRS initially denies a claim, timely filing keeps open the possibility of future relief if the government adopts the court’s interpretation or if additional litigation confirms it.
Given the complexity of the rules and the potentially large number of affected taxpayers, individuals and businesses may wish to consult a qualified tax professional to evaluate their specific situation. What is clear from the court’s ruling and the National Taxpayer Advocate’s warning is that waiting past July 10, 2026, could permanently forfeit the chance to recover penalties and interest that, under the Kwong interpretation of the law, never should have been charged in the first place.
