If you paid penalties or interest on your taxes during COVID-19, you might have another refund coming your way. But there's a catch: To qualify, you must file a request with the IRS by July 10, 2026.
A landmark court decision, Kwong v. United States, determined that the IRS wrongly charged penalties and interest during the COVID-19 federal disaster period, which was officially declared on Jan. 20, 2020, and ended on May 11, 2023.
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The plaintiff, Terry Kwong, sued for a refund of penalties he paid for tax years 2007, 2010, 2011, 2015, and 2016. He argued that he shouldn't have paid them because he was entitled to an extension under COVID-19 relief legislation and an existing tax rule that suspends or postpones deadlines for taxpayers affected by a federally declared disaster.
The court ruled in his favor, noting that, even though a three-year-long disaster declaration was unprecedented, the tax code's language was "unambiguous" and the IRS should have extended the deadlines from 2020 to July 10, 2023 (60 days after May 11, 2023, when the federal disaster period was declared over).
Who qualifies for a refund?
As Erin M. Collins from the National Taxpayer Advocate, an independent organization within the IRS, wrote last week, tens of millions of taxpayers were assessed for penalties or interest for filing or paying late during the COVID-19 disaster period, from individuals and small businesses to corporations, estates and trusts.
If the Kwong v. United States ruling stands (the government will likely file an appeal), taxpayers will be eligible for a refund if they paid a penalty or interest for:
- Filing a tax return late
- Failing to pay taxes on time
- Failing to make estimated tax payments
- Overpaying interest on taxes they owed between 2020 and 2023
The easiest way to find that information is by going through those years' tax files and reviewing if you paid or were liable for any penalties or interest. You can find that information on your federal income tax transcripts in your individual online account with the IRS.
I'm eligible. How do I claim a refund?
Here's where it gets a bit tedious. If the ruling holds up, the refunds won't be issued automatically. To request a refund, you'll need to mail a special Form 843 by July 10, 2026, to the IRS service center where you would've filed the tax return you're contesting. Collins also recommended that you send the claim by certified mail — if it gets delayed or buried in the IRS's backlog, you'll have evidence that you filed in time.
Why July 10, 2026? Because that date marks three years from the new tax deadline determined in Kwong v. United States.
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According to IRS rules, taxpayers must claim a refund or abatement (a reduction on what you owe and haven't paid yet) within three years from the date they filed their tax return, or two years from the date they paid the tax. The Kwong ruling changed the deadline on the taxes and payments you owed from the COVID-19 disaster period to July 10, 2023. This revision also shifted the three-year window to claim a refund to July 10, 2026.
There are two types of refund claims you can file with the IRS: a formal refund claim or a protective refund claim.
You can file a formal refund claim when you know how much you're owed. This type of claim has an expiration date; the IRS has to respond within six months, and if the agency refuses the refund, you have two years to sue for it. Once two years elapse, the IRS is barred from paying, no matter if your claim is valid or not.
On the other hand, a protective refund claim is typically filed when you don't know how much you're entitled to because the issue is still wrapped up in litigation — in this case, the Kwong case — and the IRS can't act on it until the legal process is resolved. According to Collins, this is the type of form that you should file for a "COVID refund."
On the National Taxpayer Advocate blog, she explains that a protective refund claim preserves the taxpayer's refund rights while litigation continues. Because the case is still being litigated, this extra step protects your claim from expiring while the law makes its way through the courts — a process that may take years.
She notes that you need to sign and file Form 843 and recommends writing “Protective Refund Claim Pursuant to Kwong Case” or something to that effect across the top. You don't need to calculate what you're owed for the form to be valid, but the form can't be vague. It must include why you're filing the claim, the tax year(s) you're contesting and what legal issue affects your claim (the Kwong case), as well as your personal information and taxpayer identification number (TIN). For most individuals, this is their Social Security number.
You'll need to file Form 843 for each tax period you're claiming a refund for. For example, if you paid interest or late penalties for the 2019 and 2022 tax years, you'll need to file a separate form for each year.
“I anticipate the Department of Justice will appeal the decision,” wrote Collins in part 1 of a series of blog posts. “It may take several years until the issue is finally resolved by the courts."
In other words, don't count on getting that money anytime soon. Even if the IRS wasn't already struggling with staffing shortages and backlogs, it may take years before you see a check. But if you're eligible for the refund, it's paramount that you claim the money before the July 10 deadline. Whether the ruling holds up or not is up to the courts, and if it does, you don't want to miss out on your slice of the pie.
"A timely claim is more important than a perfect one," Collins noted. "Claims may be supplemented with additional details, but a missed deadline cannot be corrected."
