Taxpayers who paid late-filing penalties on their 2020 or 2021 federal returns have just 16 days to file a claim that could get that money back. The Taxpayer Advocate Service has warned that tens of millions of filers may qualify for refunds tied to COVID-era deadline extensions, but the window to act closes on July 10, 2026. For many, the required step is filing a Form 843 with the IRS, a written request for penalty abatement or refund that preserves their rights while the legal question behind these claims remains unresolved.
A court ruling, a ticking clock, and millions of dollars at stake
The deadline traces back to a November 2025 opinion from the U.S. Court of Federal Claims in Kwong v. USA. In that case, the court interpreted Internal Revenue Code Section 7508A(d) as extending certain tax-related deadlines because of the COVID-19 disaster declaration. The court’s reading set July 10, 2023, as the end date for postponed filing obligations, which in turn created a three-year refund-claim window expiring on July 10, 2026. Taxpayers who filed late and paid the resulting penalties during that period now have a legal basis to argue those penalties should never have been assessed.
The IRS has already returned $1.2 billion in penalties to 1.6 million taxpayers through earlier rounds of automatic penalty relief for tax years 2019 and 2020. Separate automatic relief also covered certain businesses and tax-exempt organizations for 2020 and 2021. But those programs did not reach every affected filer. Individual taxpayers who fell outside the automatic programs, or who paid penalties that were never reversed, now face a different path: filing a written claim before the deadline.
According to the National Taxpayer Advocate, tens of millions of individual and business filers could potentially benefit from the Kwong interpretation. Many of those taxpayers may not realize they were ever eligible for relief, particularly if they assumed late-filing penalties were final once paid. The looming deadline means that inaction now could permanently close the door on recovering money that, under the court’s view, should not have been collected in the first place.
Why Form 843 is the only path for many filers
The IRS uses Form 843 as the standard written request when penalty relief cannot be approved by phone or through automated systems. The Taxpayer Advocate Service has identified Form 843 as the mechanism most affected taxpayers will need to use, and has outlined the elements the IRS Internal Revenue Manual requires for a valid protective claim. Those elements include clearly identifying the tax year, specifying the type and amount of penalty at issue, and stating that the claim is being filed protectively in light of the Kwong litigation and the application of Section 7508A(d).
A protective claim is not a demand for immediate payment. It is a placeholder that tells the IRS a taxpayer believes a refund is owed but acknowledges the legal question has not been fully settled. Filing one before July 10 preserves the right to collect if the Kwong interpretation is ultimately upheld or if the IRS changes its administrative position. Failing to file by the deadline could permanently forfeit that right, regardless of how the law develops afterward.
The practical first step for anyone who paid a late-filing penalty for 2020 or 2021 and did not receive automatic relief is to obtain Form 843 from the IRS website, complete it with the required information, and mail it to the service center that processed the original return. Taxpayers should attach a brief statement explaining that they are seeking a refund of late-filing penalties based on the disaster-related postponement of deadlines under Section 7508A(d) and referencing the Kwong decision. Keeping copies of the form, statement, and proof of mailing is essential in case questions arise later.
Who should consider filing a protective claim
Not every taxpayer will benefit from filing. Those who filed their 2020 and 2021 returns by the postponed deadlines and never incurred a penalty have nothing to recover. Similarly, taxpayers whose penalties were already reversed under prior IRS relief programs may not have additional amounts at stake. The focus is on individuals and businesses that filed after the extended due dates, were charged late-filing penalties, and either paid those penalties or had them offset against refunds.
The Taxpayer Advocate has emphasized that even taxpayers unsure of their exact penalty amounts should consider acting quickly. Account transcripts, prior IRS notices, or the original tax return files may provide enough information to estimate the penalties paid. A carefully drafted Form 843 can still be valid as a protective claim even if the final dollar figure is later refined, as long as it reasonably identifies the tax periods and issues involved.
In a follow-up analysis, the Taxpayer Advocate Service has also discussed how the reasoning in Kwong could affect other time-sensitive tax items, including missed refunds and credit claims, underscoring the broader stakes for affected taxpayers. For now, however, the most urgent action item is clear: anyone who paid late-filing penalties for 2020 or 2021 and did not receive automatic relief has until July 10, 2026, to file a protective Form 843 and keep the possibility of a refund alive.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
