Tens of millions of Americans may be owed money back from the IRS for late-filing and late-payment penalties assessed during the COVID-19 pandemic. The problem: most of them don’t know it, and the window to claim that money is closing fast.
The National Taxpayer Advocate (NTA) published an analysis in April 2026 warning that “tens of millions” of taxpayers could be eligible for penalty refunds tied to the COVID-19 disaster period. Based on the NTA’s reading of disaster-period postponement rules under Section 7508A of the Internal Revenue Code, the effective deadline to file a refund claim falls on July 10, 2026. That is roughly 64 days from now, as of mid-May 2026.
A critical caveat: the IRS itself has not formally published July 10 as an official deadline. The date comes from the NTA’s statutory math, not from an agency announcement. But the Advocate’s office is urging taxpayers not to wait for the IRS to confirm it, because once the statute of limitations expires, no future policy change or court ruling can reopen the claim.
The IRS has already returned more than $1.2 billion in penalty relief for earlier tax years through automatic programs. A recent federal court ruling suggests the eligible pool is far larger than what those programs covered.
How COVID Created a Penalty Refund Window
The federal government classified COVID-19 as a federally declared disaster spanning January 20, 2020, through May 11, 2023. Under Section 7508A, the Treasury Department and the IRS have authority to postpone certain tax deadlines whenever a federal disaster is in effect.
In Kwong v. United States (No. 23-1371, U.S. Court of Federal Claims), the court interpreted that statute to mean filing and payment deadlines falling within the disaster window were automatically postponed. If that reasoning applies broadly, it extends the refund statute of limitations for millions of people who were assessed late-filing or late-payment penalties during those years.
The practical effect: penalties that were legally valid under normal IRS rules may not have been valid under disaster-period rules. If so, the money should be returned.
What the IRS Has Already Refunded
The agency has acted on portions of this problem, though significant gaps remain.
- Late-filing penalty relief (2019 and 2020 returns): Under Notice 2022-36, the IRS provided automatic penalty relief for taxpayers who submitted late 2019 and 2020 returns by September 30, 2022. That program sent refunds or credits to nearly 1.6 million taxpayers, totaling more than $1.2 billion.
- Late-payment penalty relief (2020 and 2021 returns): The IRS separately announced automatic failure-to-pay penalty relief for certain 2020 and 2021 income tax returns where the assessed balance was under $100,000, including refunds or credits for penalties already collected.
If you already received automatic relief under either program, you do not need to refile for the same penalties. But many taxpayers paid penalties that fell outside those narrow programs. The Kwong reasoning could cover a much wider range of cases, including penalties on returns filed after the Notice 2022-36 cutoff, penalties on balances above $100,000, and penalties assessed for tax years 2021 and 2022.
Who Should File a Claim
According to the NTA’s analysis, you may have a valid refund claim if all of the following apply:
- You were assessed a failure-to-file penalty (IRC 6651(a)(1)), a failure-to-pay penalty (IRC 6651(a)(2)), or both.
- The deadline that triggered the penalty fell within the COVID disaster period (January 20, 2020, through May 11, 2023).
- You have not already received relief through one of the IRS’s automatic programs.
This could include individual filers, small businesses, estates, and trusts. The general rule for claiming a federal tax refund gives taxpayers three years from the date a return was filed or two years from the date the tax was paid, whichever is later. The disaster-period postponement effectively shifts that window forward, but only if a claim is filed before it closes.
Neither the IRS nor the NTA has published an estimate of the average refund amount per taxpayer. Failure-to-file penalties can reach 25% of the unpaid tax, and failure-to-pay penalties accrue at 0.5% per month, so the amounts vary widely depending on the size of the original balance and how long the penalty ran. For some filers, the refund could be a few hundred dollars. For others, it could be thousands.
How to File Before the Deadline
The standard vehicle for requesting a penalty refund is IRS Form 843 (Claim for Refund and Request for Abatement). Here is what to do:
- Pull your IRS account transcripts. Log in to your IRS online account or request transcripts by mail. Look for penalty codes tied to failure to file (IRC 6651(a)(1)) and failure to pay (IRC 6651(a)(2)). Note the exact amounts and the tax periods involved.
- Complete Form 843. Identify the tax period, the type of penalty, and the dollar amount. In the explanation section, cite Section 7508A and the COVID-19 disaster-period postponement as the basis for your claim. You can also reference the Kwong v. United States decision.
- Mail the form to the correct IRS service center. Form 843 must be submitted by mail to the IRS service center where you filed the original return. The form and its instructions are available on IRS.gov.
- File before July 10, 2026. Use certified mail or a private delivery service recognized by the IRS so you have documented proof of the filing date. The IRS accepts the postmark date as the filing date for statute-of-limitations purposes.
If the process feels overwhelming, the Taxpayer Advocate Service can help, particularly if you are facing financial hardship. A qualified tax professional can also evaluate whether your specific penalties fall within the disaster-period window.
What Remains Unresolved
Taxpayers filing these claims should understand what is settled and what is not.
The Kwong ruling came from the U.S. Court of Federal Claims, a trial-level court. It has not been affirmed by an appellate court. As of May 2026, there is no public indication from the Department of Justice or the IRS whether the government plans to appeal the decision or accept its reasoning for future cases. The IRS has not issued a statement confirming it will apply the Kwong interpretation nationwide to all penalty refund claims tied to the COVID disaster period. The agency could choose to deny some or all of those requests, particularly if a higher court narrows or rejects the reasoning.
If the IRS denies your Form 843 claim, you are not out of options. You can request a conference with the IRS Office of Appeals, or you can file suit in the U.S. Court of Federal Claims or a federal district court to recover the refund. Those steps involve more time and potentially legal costs, but the right to pursue them depends on having filed the initial claim before the statute of limitations expires.
There is also a practical question about processing speed. The earlier automatic relief programs worked because the IRS matched penalty data already in its systems. A wave of individual Form 843 claims filed before July 10 would require case-by-case review, and neither the IRS nor Treasury has published processing timelines or staffing plans for that scenario. Expect delays.
State Penalties Are a Separate Question
While many states conformed to some federal COVID relief measures, no primary federal source addresses whether state revenue agencies will honor the same disaster-period extensions for penalty refunds. Taxpayers who paid state-level penalties during the same years should not assume that a federal statute of limitations extension automatically translates into state relief. Check with your state tax agency or a tax professional for state-specific guidance.
Why Filing a Form 843 Before July 10 Is the Only Way to Protect Your Refund Rights
The legal foundation for these refund claims rests on three pillars: the statutory text of Section 7508A, the Court of Federal Claims’ reading of that text in Kwong, and the National Taxpayer Advocate’s decision to publicly urge taxpayers to act before the window closes. Together, they give a large group of filers at least a credible legal basis to argue their deadlines were postponed during the COVID disaster period.
But credible is not the same as guaranteed. The absence of an explicit, agency-wide IRS policy adopting the Kwong reasoning means some claims could be denied. Filing does not promise a check in the mail. What it does is preserve your right to benefit from any eventual resolution, whether that comes through IRS policy, further court rulings, or congressional action.
The one move that carries a permanent cost is waiting. Once July 10, 2026, passes, the statute of limitations closes for good. Filing a Form 843 costs nothing but time. Not filing could cost you hundreds or thousands of dollars you are legally owed, with no way to recover them later.
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.
