May 20, 2026
Most Americans have already filed their taxes and moved on. But there’s a separate deadline this summer that could put real money in the pocket of tens of millions of people, and most of them don’t even know it exists.
A federal court just ruled that the IRS improperly assessed penalties and interest during the COVID-19 disaster period. If you were hit with those charges, you can claim a refund, but the window closes on July 10, 2026. The IRS is expected to fight the ruling, and the case could drag on. Still, the National Taxpayer Advocate — the independent voice inside the IRS that speaks for taxpayers — is urging people to act before the deadline regardless.
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“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,” National Taxpayer Advocate Erin Collins wrote in an April 30 blog post.
What the court found, and why it matters
The case is titled Kwong v. United States, decided by the U.S. Court of Federal Claims. The ruling turned on a specific provision of the tax code governing how federal disaster declarations affect filing and payment deadlines.
When the COVID-19 national disaster was declared on January 20, 2020, the court found that the law automatically postponed all tax filing and payment deadlines for the entire duration of the disaster period — through July 10, 2023, including 60 days after the formal disaster declaration ended on May 11, 2023. That means the IRS should not have assessed failure-to-file or failure-to-pay penalties during that entire 3.5-year window. If it did, those assessments were improper.
“By the court’s logic, the IRS should not have assessed penalties for late filing or payment during that 3.5-year period (between Jan. 20, 2020, and July 10, 2023), nor charged interest on those amounts,” Collins wrote.
To understand what this means in dollars: the failure-to-file penalty is 5% of unpaid taxes per month, capped at 25%. The failure-to-pay penalty is 0.5% of the balance monthly, also capped at 25%. Interest runs on top of both penalties.
If you filed late or underpaid during the pandemic years and were hit with these charges, the total can add up quickly. If you owed $10,000 and filed 5 months late during the pandemic, you could face $2,500 in failure-to-file penalties (the 25% cap), plus $250 in failure-to-pay penalties, plus interest on top of that — totaling well over $2,750 in charges. For many taxpayers, we’re talking about a significant amount — and under Kwong v. United States, it could be refundable.
Collins described the issue as widespread, saying it’s “not limited to a small or specialized group of taxpayers.” The people affected represent a broad cross-section of the public, including individuals, small businesses, large corporations, estates, and trusts.
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Why the IRS is expected to push back
The ruling is not final. Collins herself wrote in her blog that she expected the Department of Justice to appeal Kwong to the Federal Circuit, which could overturn or narrow the lower court’s ruling.
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“It may be a drawn-out case with multiple plaintiffs that takes years to resolve,” Alyssa Maloof Whatley, a director at Frost Law, a tax firm based in Annapolis, Maryland, told CNBC Select. “Even something simple, like resolving an identity theft issue, can take a year or two.”
That’s why filing by July 10 is so important, even if you’re not certain you’ll win. Under tax law, you generally have three years from a return’s due date to claim a refund. And under the Kwong reasoning, all pandemic-era returns were effectively due July 10, 2023. That means the three-year window closes July 10, 2026.
Miss that date, and you’ll likely lose the right to claim a refund for those years — for good, no matter how the appeal plays out.
Filing what’s called a “protective claim” before the deadline keeps your options open, even if the law is still unsettled. It doesn’t cost anything except your time, and it preserves your right to a refund if the ruling stands.
Who this applies to and what to do
Anyone who paid — or was assessed — penalties and interest for failure-to-file or failure-to-pay between January 20, 2020, and July 10, 2023, may have a claim. That includes estimated tax penalties too. And it’s not just regular folks: individuals, small businesses, partnerships, corporations, estates, and trusts could all be eligible.
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The first step is checking your IRS tax account transcripts for tax years 2019 through 2022. These show every penalty and interest charge the IRS assessed and when. You can access them for free through your IRS Individual Online Account. Look for any penalty or interest charges dated within the January 20, 2020, to July 10, 2023, window.
If you find eligible charges, the form to file is Form 843, Claim for Refund and Request for Abatement, available on the IRS website. Collins recommends writing “Protective Refund Claim Pursuant to Kwong Case”, or something similar across the top.
The form must be mailed (it cannot be filed electronically) and Collins specifically advises sending it via certified mail for proof of submission before the deadline. File a separate Form 843 for each tax year and each type of penalty.
If you already paid the penalties and interest, you are requesting a refund. If you were assessed but haven’t paid, you are requesting an abatement (cancelling or reducing what you owe) — and the July 10 deadline is less urgent for that group, though tax professionals advise not waiting.
“If everything was paid during the Kwong window, it’s pretty easy to calculate what you should get back,” Maloof Whatley told CNBC. For more complex situations involving multiple years or business entities, a tax professional can help identify which penalties qualify.
You’ve got eight weeks to file. The form is free. And if the ruling stands, the refund could be meaningful for anyone who got hit with IRS penalties during the pandemic years.
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Godwin Oluponmile is a content specialist, SEO strategist and copywriter with seven years of expertise in finance, Web 3.0, B2B SaaS and technology. His work has been featured in publications such as Entrepreneur, HackerNoon, Blocktelegraph and Benzinga.
