If you paid a penalty or interest on a federal tax balance at any point between early 2020 and mid-2023, the IRS may owe you money. The National Taxpayer Advocate believes the pool of affected filers could number in the tens of millions, a figure the Advocate treats as an upper-bound projection rather than a confirmed count. The office has now published a detailed, two-part guide showing how to pull your IRS account transcript, decode the transaction codes on it, and file a formal claim for a refund. But there is a hard deadline: for most of these claims, the statute of limitations expires on July 10, 2026, and the IRS has given no indication it plans to issue refunds on its own.
The legal theory behind the refunds
The argument starts with 26 U.S.C. Section 7508A, the federal statute that lets the IRS postpone certain tax deadlines when a federally declared disaster is in effect. During the COVID-19 emergency, the IRS invoked that authority multiple times, ultimately defining a disaster period running from January 20, 2020, through July 10, 2023, under Notice 2023-21 and related FEMA declarations.
A 2024 decision from the U.S. Court of Federal Claims gave the theory sharper teeth. In Kwong v. United States (Case 1:23-cv-00267), the court read Section 7508A’s postponement rules to mean that penalties and interest assessed during the disaster window should never have been imposed, because the underlying deadlines were effectively suspended. The ruling is a trial-court decision with no binding authority beyond that single case. As of late May 2026, there is no public indication the government has formally acquiesced to the reasoning, and it is not publicly known whether the government has appealed the decision. Still, the Taxpayer Advocate seized on it in an April 2026 blog post, arguing that the same logic should apply to every taxpayer penalized during the same period.
This is not the first round of COVID-era penalty relief. In 2022, the IRS issued Notice 2022-36, which waived failure-to-file penalties on certain 2019 and 2020 returns (and some 2021 returns) filed by a specified deadline. That notice also covered some international information return penalties. But the current argument goes further. It targets failure-to-pay penalties, interest charges, and other assessments that Notice 2022-36 never addressed, or that the IRS failed to reverse even though the disaster declaration was in effect.
How to check your transcript, step by step
In a May 2026 follow-up post, the Taxpayer Advocate’s office published the practical walkthrough. Here is what the process looks like:
- Log into your IRS online account. Go to the IRS Online Account portal and either create an account or sign in with your existing ID.me credentials. Navigate to “Tax Records” and request an Account Transcript for each tax year you want to review. The years 2019, 2020, 2021, and 2022 are the most likely candidates, though any year with an outstanding balance during the disaster window could be relevant.
- Look for penalty and interest transaction codes. Your transcript lists every significant action the IRS has taken on that tax year. Each line carries a three-digit transaction code, a date, and a dollar amount. The codes that matter most:
- TC 160 – Failure-to-file penalty assessed
- TC 276 – Failure-to-pay penalty assessed
- TC 196 – Interest charged to your account (note: interest abatement has a different legal standard than penalty abatement, so these claims can be more complex)
If you want to look up other codes, the IRS publishes a full reference in Document 6209, which decodes every transaction code that can appear on a transcript.
- Check the dates against the disaster window. For each penalty or interest line, look at the assessment date. If it falls between January 20, 2020, and July 10, 2023, it potentially qualifies for abatement under the Advocate’s theory. The May blog post provides examples of common transcript patterns and walks through how to compare dates.
- Confirm the charge has not already been reversed. Scan the transcript for corresponding reversal codes. For example, TC 161 reverses a failure-to-file penalty, and TC 277 reverses a failure-to-pay penalty. If you see a reversal for the same amount and tax year, the IRS already removed that charge and no claim is needed.
- File Form 843 to claim a refund or abatement. For any penalty or interest that was assessed during the disaster window and has not been reversed, submit IRS Form 843 (Claim for Refund and Request for Abatement). On the form, specify the tax year, the type of penalty, and cite Section 7508A and the COVID-19 disaster period (January 20, 2020, through July 10, 2023) as the legal basis. Attach copies of the relevant transcript pages with the contested charges highlighted, along with any prior IRS correspondence about those penalties.
Why July 10, 2026 is the deadline that matters
Under Section 6511 of the Internal Revenue Code, taxpayers generally must file a refund claim within three years of the date a payment was made (or, in some situations, within two years of payment, whichever provides the longer window). Because the COVID-19 disaster period ended on July 10, 2023, any penalty or interest payment made on or near that date hits its three-year refund window on July 10, 2026. Payments made earlier in the disaster period may already be outside the refund window or close to it.
The Taxpayer Advocate warns that once the statute-of-limitations clock runs out, the IRS has no authority to issue a refund regardless of the merits. That makes the next several weeks critical for anyone who suspects they overpaid.
What the IRS has not said
As of late May 2026, the IRS has not publicly responded to the Taxpayer Advocate’s blog series or confirmed that it will adopt the Kwong interpretation of Section 7508A on a nationwide basis. There has been no announcement that the agency will automatically identify and refund all affected penalties and interest. The Advocate is effectively telling taxpayers: do not wait for the IRS to come to you.
It is also unclear how consistently IRS employees will process individual Form 843 claims based on this theory. The Advocate acknowledges that frontline staff may not yet be trained on the implications of Kwong or the disaster-period dates, and that some claims could be denied on first review. Taxpayers who receive a rejection can pursue the IRS administrative appeals process or, if the dollar amounts justify it, file a refund suit in federal court, subject to the usual procedural rules and filing deadlines. Realistically, an appeal adds months to the timeline, and a federal suit adds significant cost, so the practical value of filing depends heavily on how much money is at stake.
Another open question is scope. The Advocate’s analysis focuses on failure-to-file penalties, failure-to-pay penalties, and related interest on individual income tax returns. But taxpayers may also have incurred charges on employment taxes, excise taxes, or information return penalties during the disaster window. Whether Section 7508A requires relief in those contexts depends on the specific deadlines involved and how closely they tie to the postponed acts described in the statute. Taxpayers who were on installment agreements during the disaster period and accrued penalties or interest on those balances face a similar question that the Advocate’s guidance does not fully address.
What to do if you have already been denied penalty relief
Some taxpayers may have previously requested penalty abatement under the IRS’s standard “reasonable cause” criteria and been turned down. That denial does not necessarily bar a new claim under the disaster-period theory, because the legal basis is different. A Form 843 citing Section 7508A and the Kwong reasoning is a separate argument from a reasonable-cause request, and the Advocate’s guidance treats it as such. If you were denied before, it is still worth pulling your transcript and checking whether the charges fall within the disaster window.
For taxpayers who spot a few hundred dollars in penalties on a transcript, filing Form 843 is a relatively low-effort exercise: the form itself is one page, and the IRS does not charge a fee to submit it. For those facing thousands of dollars in combined penalties and interest across multiple tax years, the process can get complicated quickly. The IRS funds a network of Low Income Taxpayer Clinics that offer free or low-cost help to qualifying individuals, and the Taxpayer Advocate Service itself can intervene when a taxpayer faces significant hardship. For everyone else, a tax professional familiar with penalty abatement and disaster-period rules can evaluate whether a claim is worth pursuing and help navigate a denial if one comes.
The Advocate’s own materials make the next step plain: pull your transcripts now, check the dates, and file before July 10 if you find charges that should not have been there. The IRS is not going to do it for you.
Paul Anderson is a finance writer and editor at The Financial Wire. He has spent seven years writing about investment strategies and the global economy for digital publications across the US and UK. His work focuses on making sense of economic policy, cost-of-living issues, and the stories that affect everyday Americans.
