Tens of millions of taxpayers who paid penalties or interest to the IRS during the COVID-19 pandemic period may be entitled to refunds, but the window to file a claim closes on July 10, 2026. That deadline is now 31 days away. The Taxpayer Advocate Service, an independent office within the IRS, has warned that failing to act before that date could permanently forfeit refund rights tied to the agency’s disaster-relief postponement of filing and payment deadlines covering Jan. 20, 2020, through July 10, 2023.
Why the July 10, 2026, deadline changes the math for penalty refunds
The IRS postponed federal tax filing and payment deadlines during the pandemic under disaster-relief authority. That postponement shifted the effective due date for many obligations to July 10, 2023. Because the standard statute of limitations for claiming a refund runs three years from the date a return was due or filed, the clock on many COVID-era overpayment claims expires on July 10, 2026. Once that date passes, the IRS has no obligation to return money it collected, even if the penalties were later deemed improper.
The agency did grant automatic penalty relief for certain 2020 and 2021 tax returns under a program documented in penalty guidance. That program waived failure-to-file penalties for eligible returns and, in some cases, issued credits or refunds automatically. But the automatic relief did not reach every taxpayer or cover every type of overpayment. Anyone who paid penalties or interest outside the scope of that program, or who never received a credit, faces a separate, manual process to recover those amounts.
The Taxpayer Advocate Service has emphasized that many people may not realize they are still within the window to seek money back. Its analysis of potentially eligible taxpayers suggests that both individuals and businesses could be affected, including those who filed late, entered into installment agreements, or simply paid assessed amounts without challenging the underlying penalties or interest.
Form 843 and the disaster-relief statute of limitations
The Taxpayer Advocate Service has directed affected filers to submit Form 843 to claim a refund or abatement. That form is the IRS’s standard vehicle for requesting a return of penalties, interest, or certain taxes already paid. By tying the claim to the July 10, 2023, disaster-relief due date, filers anchor their request to the specific statutory mechanism that extends the refund window to July 10, 2026.
To be considered timely, a Form 843 must be mailed or electronically submitted so that it is filed on or before July 10, 2026, and it must clearly identify the tax period, the type of penalty or interest at issue, and the connection to the COVID-19 disaster postponement. The Taxpayer Advocate Service has urged taxpayers to retain proof of mailing or submission and to keep copies of any IRS notices showing how the original penalties or interest were calculated.
In addition to formal refund claims, the Taxpayer Advocate Service has recommended that some taxpayers file “protective” claims. In a recent blog post on protective filings, the office explained that a protective claim is a way to preserve a taxpayer’s right to a refund when the legal basis is uncertain or still being litigated. A protective claim generally identifies the taxpayer, the tax years involved, the type of tax, and a description of the issue, while noting that the exact amount of the refund may depend on the outcome of pending legal developments.
How the Kwong case could expand refund opportunities
A separate federal case could broaden the scope of recoverable amounts beyond penalties and interest. The lawsuit, docketed as Kwong v. USA at the U.S. Court of Federal Claims, raises the question of whether the COVID-era postponement also preserved refund rights for other deadline-driven tax obligations, such as certain tax credits or overpayments that would otherwise be time-barred. The Taxpayer Advocate Service has described how the Kwong litigation might affect taxpayers who missed out on refunds because they filed after the normal deadline but within the postponed disaster-relief period.
According to that analysis, if the court ultimately agrees that the disaster-relief postponement extended not only payment and filing deadlines but also refund statutes, some taxpayers who believed they had permanently lost refunds could regain eligibility-provided they file timely claims now. Because the case remains unresolved, the Taxpayer Advocate Service is encouraging taxpayers who may be affected to file protective claims referencing the postponement period and the issues being raised in Kwong.
For taxpayers, the practical takeaway is straightforward but time-sensitive: review any penalties, interest, or missed refunds tied to tax years whose deadlines fell between Jan. 20, 2020, and July 10, 2023, and consider whether a formal or protective claim is warranted. Tax professionals may need to revisit client files from the early pandemic years, especially for those who filed late returns, made large estimated tax payments, or resolved balances through payment plans during the disaster-relief window.
With only weeks remaining before the July 10, 2026, cutoff, waiting could mean leaving significant money with the IRS permanently. Taxpayers who think they might qualify are being urged by the Taxpayer Advocate Service to act now-either by filing Form 843 themselves or by consulting a qualified tax adviser-so that their rights are preserved before the statute of limitations closes the door.
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.
