Tens of millions of taxpayers who paid late-filing or late-payment penalties to the IRS during the COVID pandemic may be entitled to get that money back. But there is a hard deadline approaching: July 10, 2026. After that, the three-year statute of limitations will close on these claims for good.
The penalties in question were assessed between January 20, 2020, and July 10, 2023. A federal court has ruled they should never have been charged in the first place, because a disaster-relief statute effectively paused the deadlines that triggered them. The IRS, however, has taken no public action to refund the money on its own, and as of June 2026 has not released any public guidance on whether it intends to apply the court’s reasoning. In the absence of any announced IRS initiative, individual taxpayers need to file a claim or risk losing whatever they are owed.
The National Taxpayer Advocate, an independent watchdog inside the IRS, issued an unusually urgent call in April 2026, warning that tens of millions of accounts could be affected and that filers should act now rather than wait for the agency to make up its mind.
The court ruling behind these refunds
The legal basis for these claims is Kwong v. United States, a case decided in 2024 by the U.S. Court of Federal Claims (179 Fed. Cl. 382). The court examined a provision of the Internal Revenue Code, Section 7508A, that gives taxpayers in a federally declared disaster area an automatic extension of at least 60 days past the end of the disaster for certain filing and payment obligations.
The federal COVID national emergency ran from January 20, 2020, through May 11, 2023. Adding the mandatory 60-day extension lands on July 10, 2023. The Kwong court concluded that during that entire window, the obligations that trigger late-filing penalties, late-payment penalties, and related interest were effectively suspended. Penalties assessed during that period, the court found, were imposed on deadlines that had not actually passed yet.
The practical upshot: if you paid any qualifying penalty between those dates, you may have a valid claim for a refund. Individual penalty amounts vary widely depending on the type of return, the balance owed, and how long the filing or payment was overdue, so there is no single figure that applies to every filer. But because federal law generally gives taxpayers three years to request a refund under Internal Revenue Code Section 6511, the clock on claims tied to the July 10, 2023, cutoff runs out on July 10, 2026.
How this goes beyond earlier IRS relief
The IRS did grant some pandemic-related penalty relief on its own, but it was far narrower than what the Kwong ruling implies. In a separate action, the agency used its existing authority to waive certain failure-to-pay penalties for 2020 and 2021 tax returns that were caught up in paused collection notices.
That relief covered fewer penalty types and fewer tax years. Taxpayers who already benefited from it may still qualify for additional refunds under the broader disaster-extension argument, particularly if they paid late-filing penalties or were assessed penalties for tax years 2022 or early 2023 that the IRS’s earlier action did not touch.
Why the IRS has not acted on its own
The Court of Federal Claims is a trial-level court. Its rulings do not automatically bind the IRS the way a Supreme Court or federal appellate decision would. As of June 2026, the IRS has not released any public guidance indicating it plans to apply the Kwong reasoning across the board, and it has not announced a new relief initiative tied to the disaster-extension statute. This silence does not amount to an explicit refusal; rather, the agency simply has not taken a public position. The government has not appealed the decision, but it still has the option to do so.
There is no comprehensive IRS data showing exactly how many penalties were collected during the covered window or how much money is at stake in total. The Taxpayer Advocate’s estimate of tens of millions of potentially affected accounts is based on internal sampling and public penalty statistics rather than a full agency count. It includes individual income tax returns, business returns, and certain information returns.
The Taxpayer Advocate’s office has also flagged a concern that reaches beyond penalties. In a follow-up analysis published in May 2026, the office warned that the same statutory interpretation could affect other time-sensitive tax deadlines, including windows for claiming refunds that taxpayers and tax practitioners had assumed were already closed. If the disaster period and its 60-day extension paused or shifted those deadlines, some filers may have opportunities they did not know existed.
How to file a protective claim before July 10
A protective claim is essentially a placeholder: you are formally telling the IRS you believe you are owed a refund and preserving your legal right to collect it, even if the underlying legal question has not been fully resolved yet. If courts ultimately uphold the Kwong reasoning, your claim is in the queue. If you never file one, you will likely have no recourse once the statute of limitations expires.
Here is what the Taxpayer Advocate recommends for anyone who paid late-filing or late-payment penalties between January 20, 2020, and July 10, 2023:
- Pull your IRS account transcript. You can request transcripts online through your IRS Online Account or by filing Form 4506-T. Look for any penalty charges dated within the disaster window.
- File a formal refund claim using Form 843. Form 843 (Claim for Refund and Request for Abatement) is the standard form for penalty refund requests. In the explanation section, reference the disaster-relief provisions under Internal Revenue Code Section 7508A, the dates of the COVID national emergency (January 20, 2020, through May 11, 2023), and the Kwong v. United States decision.
- Submit the claim before July 10, 2026. Even though the legal landscape is still unsettled, filing now locks in your right to a refund if the ruling holds. Waiting for the IRS to act on its own is a gamble with a firm expiration date.
- Get help if you need it. A tax professional can review your transcripts and prepare the claim. The Taxpayer Advocate Service is also available at 1-877-777-4778 or through your local Taxpayer Advocate office.
One important limitation: this relief applies only to federal tax penalties. State tax penalties operate under separate rules and are not affected by the Kwong decision or the federal disaster declaration.
What happens if the IRS denies your claim
Filing a protective claim does not guarantee a payout. The IRS could deny individual claims, especially while the legal question remains unresolved at higher court levels. If that happens, taxpayers generally have the right to challenge the denial, either through the IRS appeals process or by filing suit in federal court. But the critical point is that you can only fight for a refund you have formally claimed. Once the statute of limitations closes, the door shuts regardless of what courts decide later.
The Taxpayer Advocate has been unusually blunt on this point, writing in April 2026 that “taxpayers should not have to lose their right to a refund simply because the IRS has not yet decided how to respond to a court decision.”
With roughly 40 days left, the safest course for anyone who paid IRS penalties during the COVID emergency period is to file the claim now. The paperwork is straightforward, and the downside of not filing is permanent.
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.
