Millions of taxpayers who paid failure-to-pay penalties on their 2020 through 2023 federal returns have 28 days left to file a claim that could recover some of that money. July 10, 2026, is the act-by date that tax practitioners and the Taxpayer Advocate Service have flagged as a deadline to preserve potential refund rights under IRC Section 7508A(d), the statute that triggered an automatic and mandatory 60-day postponement of certain tax deadlines when the COVID-19 emergency began on January 20, 2020. The IRS already committed to waiving $1 billion in penalties for 2020 and 2021 through a separate automatic relief program, but a federal court case could open the door to broader recoveries for taxpayers who act before the window closes.
A $1 billion penalty waiver and the gap it left behind
The IRS announced automatic failure-to-pay penalty relief for many individual taxpayers, businesses, and tax-exempt organizations with assessed taxes under $100,000 for tax years 2020 and 2021, describing the details in its penalty relief guidance. Those who had already paid those penalties were told they would receive refunds or credits automatically, without filing any additional paperwork. The scale of that program reached roughly $1 billion in waived penalties, according to the agency’s own figures.
That automatic program, however, drew a hard line. It covered only tax years 2020 and 2021, applied only to balances below $100,000, and addressed only failure-to-pay penalties. Taxpayers who owed more, who paid penalties for 2022 or 2023, or who faced other penalty categories were left out. The emerging legal theory built around IRC Section 7508A(d) and the Kwong v. United States decision in the U.S. Court of Federal Claims could fill that gap, but only for those who file before the July 10 deadline.
How Kwong v. United States changed the refund math
The case docketed as 23-267 in the Court of Federal Claims tested whether the mandatory postponement language in Section 7508A(d) extends relief beyond what the IRS chose to grant through its discretionary programs. The court’s reading of the statute focused on Congress’s use of “shall postpone,” which taxpayers argue created a 60‑day suspension of certain deadlines for affected individuals starting January 20, 2020, the date the COVID‑19 emergency was declared.
That 60‑day period matters because it potentially shifts the timeline for both paying tax and claiming refunds. If deadlines were automatically moved, then penalties that accrued during the postponed window may have been assessed on amounts that were not yet legally due, and refund limitation periods may have been extended by the same number of days. Practitioners see this as a narrow but meaningful opening for taxpayers who either missed original refund deadlines or paid penalties tied to those periods.
The Taxpayer Advocate Service has laid out how this logic might apply not just to interest and penalties but also to late refund claims, emphasizing why July 10, 2026, is being treated as a practical cutoff to protect those rights. In a recent blog post, the office urged taxpayers and preparers to act quickly if they hope to benefit from the Kwong-based postponement before the opportunity closes.
Who may benefit from filing now
The potential beneficiaries fall into several overlapping groups. First are taxpayers who incurred failure‑to‑pay penalties for 2020 or 2021 but were excluded from the automatic relief because their assessed balances exceeded $100,000 or because their accounts did not meet other eligibility criteria. Second are those who paid penalties for 2022 or 2023 that may have roots in payment dates affected by the emergency‑related postponement.
A third group consists of taxpayers who filed late or did not file at all during the early pandemic years and now appear to be outside the normal refund statute of limitations. For them, the 60‑day postponement may extend the time to claim overpayments that would otherwise be lost. Each situation turns on specific dates: when the return was due, when it was filed, when payments were made, and when the IRS assessed penalties.
Tax professionals caution that Kwong does not guarantee a refund or penalty abatement for everyone who files. Instead, submitting a timely claim by July 10 preserves the argument that Section 7508A(d) postponed the relevant deadlines and that penalties or refund cutoffs should be recalculated in light of that postponement. The IRS and the courts will ultimately decide how broadly to apply the ruling, but taxpayers who miss the date are unlikely to get a second chance.
How to file a protective claim
To keep their options open, many taxpayers are filing what practitioners call “protective claims” for refund. These claims do not require the IRS to agree today that money is owed; rather, they put the government on notice that the taxpayer is asserting a right that depends on ongoing or future legal developments. If the law evolves favorably, a timely protective claim allows the taxpayer to benefit even if the formal decision arrives years later.
The IRS generally requires refund claims to be submitted on Form 1040‑X for individuals or on the amended return form for the relevant business entity. When the goal is to challenge penalties or request abatement, taxpayers and representatives often use Form 843 to set out the specific amounts and years at issue. Practitioners recommend clearly labeling the submission as a protective claim related to Section 7508A(d) and Kwong, and including a concise explanation of how the postponement may affect the taxpayer’s liability or refund period.
Because the rules around limitation periods are rigid and the factual timelines can be complex, taxpayers are being urged to consult qualified tax advisors quickly, especially if large penalties were paid or if significant refunds may be at stake. With the July 10, 2026, deadline approaching, the window to analyze records, prepare claims, and get them filed is closing fast. For millions who struggled to stay current on their taxes during the pandemic, taking that step now could be the difference between permanently forfeiting money and having a chance to get it back.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
