Millions of Americans may have an unexpected opportunity to recover IRS penalties and interest charged during the COVID-19 pandemic.
Following the federal court ruling in Kwong v. United States, taxpayers are now exploring whether they qualify for an IRS pandemic penalty refund tied to pandemic-era filing and payment deadlines.
Although the legal battle is not fully resolved, experts say eligible taxpayers should act before the July 10, 2026 deadline to preserve their refund rights.
Key points:
- The ruling may affect penalties and interest charged between January 20, 2020, and July 10, 2023
- Refunds are not automatic and generally require filing IRS Form 843
- Individuals, businesses, estates, and trusts may qualify
- Tax transcripts can help determine eligibility
- The court decision could still face appeals, making protective claims important
Understanding how this possible COVID tax relief works can help taxpayers avoid missing out on potentially significant refunds.
What Is the IRS Pandemic Penalty Refund and Why Is It Trending?
The IRS pandemic penalty refund refers to possible refunds or abatements for penalties and interest charged during the COVID-19 federal disaster period.
It gained attention after the Kwong v. United States ruling in late 2025 questioned whether IRS filing and payment deadlines should have been automatically postponed under Section 7508A(d).
If the ruling stands, many taxpayers may have been wrongly charged late penalties and interest. The issue matters because millions faced pandemic-related delays, financial hardship and confusion over changing IRS guidance.
“Taxpayers should understand that this is not an automatic refund program. Filing a timely protective claim may be essential to preserving refund rights,” said National Taxpayer Advocate Erin Collins.
As awareness grows, taxpayers and tax professionals are reviewing prior IRS assessments to determine whether they qualify for pandemic-related relief.
Why Could Millions of Americans Qualify for COVID Tax Relief?
The potential scope of the IRS pandemic penalty refund is enormous because the COVID-19 disaster period affected nearly every category of taxpayer in the United States. Individuals, freelancers, small businesses, corporations, trusts, and estates all faced unprecedented filing and payment challenges during the pandemic years.
If the court ruling remains valid, penalties assessed during the covered disaster period may have violated the tax code’s disaster relief provisions.
That could mean taxpayers are entitled to recover:
- Failure-to-file penalties
- Failure-to-pay penalties
- Estimated tax penalties
- Related interest charges
- Certain international information return penalties
Penalty comparison overview:
| Penalty Type | Typical IRS Charge | Potential Refund Eligibility |
| Failure-to-file penalty | 5% monthly up to 25% | Potentially eligible |
| Failure-to-pay penalty | 0.5% monthly up to 25% | Potentially eligible |
| Estimated tax penalty | Based on underpayment | Potentially eligible |
| Interest charges | Accrued on unpaid balances | May qualify |
| International reporting penalties | Fixed or escalating penalties | May qualify |
The exact refund amount depends on the taxpayer’s account history and the penalties assessed during the covered timeframe. Some taxpayers could recover hundreds of dollars, while others may qualify for refunds worth several thousand dollars.
Even though the legal outcome remains uncertain, tax professionals are encouraging taxpayers to preserve their rights before statutory deadlines expire.
What Did the Kwong v. United States Court Decision Actually Mean?
The Kwong v. United States ruling centered on whether the IRS properly applied federal disaster relief rules during the COVID-19 emergency period.
Understanding the COVID-19 Federal Disaster Period
The federal government declared COVID-19 a national disaster beginning January 20, 2020. According to the court’s interpretation, certain tax deadlines should have been postponed automatically throughout the disaster declaration and for an additional 60 days afterward.
That created a potential relief period extending through July 10, 2023.
The ruling suggested taxpayers should not have faced penalties or interest during that time for qualifying filing and payment obligations.
How IRS Penalties Became a Legal Dispute?
The IRS continued assessing penalties and interest during the pandemic period despite widespread disruptions. Taxpayers challenged whether those assessments violated disaster postponement rules already built into federal tax law.
The court sided with taxpayers in the Kwong case, creating a possible pathway for refunds and abatements nationwide.
However, the IRS does not currently agree with the decision, and legal appeals may continue for years.
Section 7508A(d) and Pandemic Tax Extensions Explained
Section 7508A(d) of the Internal Revenue Code governs postponed deadlines during federally declared disasters. The court determined that the statute may have automatically extended tax deadlines during COVID-19.
This interpretation differs from the IRS’s position, which is why taxpayers are being advised to submit “protective claims” while the issue remains unresolved.
“The legal question focuses on whether pandemic disaster relief should have automatically suspended certain IRS penalty assessments,” explained tax attorney Jon Wasser.
The decision does not guarantee refunds yet, but it creates a potentially significant tax relief opportunity.
Who Is Eligible to Claim an IRS Pandemic Penalty Refund?
Eligibility may extend to a wide range of taxpayers affected by IRS penalties during the covered period.
Potentially eligible taxpayers include:
- Individual taxpayers
- Self-employed workers
- Small businesses
- Large corporations
- Estates and trusts
- Taxpayers with employment or excise tax obligations
- Individuals penalized for foreign information reporting
Taxpayers who faced penalties between January 20, 2020, and July 10, 2023, should review their IRS account records. The IRS pandemic penalty refund may apply to both paid penalties and unpaid balances, allowing refunds or abatements in some cases.
Interest linked to those penalties may also qualify, which could increase the total relief amount.
Tax experts note that taxpayers may not need to prove individual COVID hardship, as the issue focuses on whether the penalties should have been assessed during the disaster period.
Which IRS Penalties and Interest Charges Could Be Refunded?
Several common IRS penalties may fall under the potential COVID tax relief framework.
Affected penalties may include late filing penalties, late payment penalties, estimated tax penalties, and interest assessed on those amounts. International reporting penalties may also qualify in some cases.
Potentially refundable charges:
| Charge Type | Description | Refund or Abatement Possibility |
| Failure-to-file | Filed taxes late | Possible |
| Failure-to-pay | Paid taxes after deadline | Possible |
| Estimated tax penalty | Underpaid quarterly taxes | Possible |
| Interest on penalties | Interest tied to balances | Possible |
| International filing penalties | Foreign account reporting penalties | Possible |
Taxpayers should remember that every IRS account is different. Some penalties may qualify while others may not, depending on timing and tax type.
Because the issue remains legally unresolved, filing a claim does not guarantee payment. However, failing to file before the statute expires could permanently eliminate the opportunity.
The safest approach is reviewing transcripts now rather than waiting for additional IRS announcements.
How Can You Check Whether the IRS Charged You Pandemic-Era Penalties?
The best way to determine eligibility is by reviewing IRS tax account transcripts. These records show penalty assessments, interest charges, payments, filing dates, and account activity.
Using IRS Tax Transcripts to Review Penalty Assessments
Taxpayers can access transcripts through an IRS Online Account using ID.me verification. Transcripts may also be requested by mail or phone.
When reviewing transcripts, taxpayers should look for:
- Penalty assessment dates
- Interest accrual periods
- Filing dates
- Payment dates
- Tax years involved
The most important step is identifying whether penalties or interest were assessed during the covered pandemic relief period.
Important Dates Taxpayers Should Verify
Several dates are especially important:
- January 20, 2020: Beginning of federal disaster period
- May 11, 2023: Official end of COVID emergency declaration
- July 10, 2023: Extended disaster relief period
- July 10, 2026: Key filing deadline for many claims
Taxpayers should compare these dates directly against IRS account records before preparing any claim.
After reviewing transcripts, taxpayers can better determine whether filing Form 843 is worthwhile.
How Do You File a COVID Tax Relief Claim With the IRS?
Most taxpayers seeking an IRS pandemic penalty refund will use Form 843, officially titled “Claim for Refund and Request for Abatement.”
The form allows taxpayers to request refunds for penalties already paid or abatements for balances still owed.
The filing process generally involves reviewing transcripts, identifying qualifying penalties, preparing supporting explanations, and mailing the form to the IRS.
Before submitting Form 843, taxpayers should prepare:
- IRS account transcripts
- Copies of penalty notices
- Tax return information
- Supporting calculations
- Mailing records
Many tax professionals recommend certified mail because Form 843 cannot be electronically filed.
A properly prepared filing should clearly identify the affected tax periods and explain that the request is connected to the Kwong v. United States litigation and COVID disaster relief interpretation.
Taxpayers should also keep copies of everything submitted in case the IRS requests additional information later.
What Is IRS Form 843 and When Should You Use It?
IRS Form 843 is the primary document used to request penalty refunds or abatements connected to the COVID-era dispute.
Protective Refund Claims Explained
A protective claim preserves a taxpayer’s legal rights while the court process continues. Since the final legal outcome remains uncertain, taxpayers are filing protective claims before deadlines expire.
The IRS may hold or delay action on these claims until litigation concludes.
This strategy helps taxpayers avoid losing eligibility under statutory refund deadlines.
Documents You Should Prepare Before Filing
Accurate documentation is critical when preparing Form 843.
Helpful supporting documents include:
- Tax account transcripts
- IRS penalty notices
- Payment records
- Prior correspondence
- Copies of affected returns
“Documentation and accurate filing details are extremely important when requesting IRS refunds tied to ongoing litigation,” noted former IRS adviser Victoria Boon.
Taxpayers should also clearly label claims as protective claims related to the Kwong case and pandemic disaster relief period.
Careful preparation can reduce processing delays and improve the likelihood of preserving refund rights.
What Common Mistakes Could Delay or Reject Your Refund Claim?
Many taxpayers risk losing potential refunds because of filing errors or incomplete documentation.
One of the most common mistakes is failing to identify the correct tax years or penalty types. Others incorrectly assume tax refunds will be automatic and never file claims at all.
Additional filing problems may include:
- Missing signatures
- Incorrect mailing addresses
- Incomplete explanations
- Failure to use certified mail
- Wrong penalty descriptions
- Missing transcript evidence
Another major issue involves timing. Taxpayers who wait too long could lose their refund rights permanently once the statute of limitations expires.
Some taxpayers also confuse refunds with abatements. Refunds apply to penalties already paid, while abatements request removal of unpaid balances.
Taking time to review all information carefully before mailing the claim can significantly reduce avoidable problems.
Should You Hire a CPA or Tax Professional for an IRS Refund Claim?
Whether taxpayers should hire a CPA or tax professional for an IRS refund claim depends on how complex their situation is.
Simple claims involving basic penalties may be manageable for taxpayers who can review IRS transcripts and complete forms correctly.
However, professional help may be useful for taxpayers with large balances, multiple tax years, business filings or international reporting penalties.
A CPA or enrolled agent can identify qualifying penalties, prepare supporting explanations, avoid filing errors, track deadlines and communicate with the IRS if needed.
Although professional support adds cost, it may help taxpayers recover larger refunds. It can also be valuable because the legal issue remains unsettled and IRS guidance may change over time.
Why Is the July 10, 2026 Deadline So Important for Taxpayers?
The July 10, 2026 deadline may be crucial for IRS pandemic penalty refund claims because it could be the final date for many taxpayers to protect their refund rights.
Key Deadline:
- Taxpayers usually have three years from the filing deadline to claim refunds.
- If July 10, 2023 is treated as the postponed filing date, July 10, 2026 becomes important.
- Missing the deadline could mean losing eligibility permanently.
- Tax professionals are encouraging taxpayers to act before final court decisions.
- Filing a protective claim may help preserve legal rights.
However, refunds are not guaranteed. The government may appeal, courts may limit the ruling, or the IRS may issue new guidance.
Still, acting before the deadline could give taxpayers important protection while the issue develops.
Conclusion
The growing attention around IRS pandemic penalty refund claims highlights a possible COVID tax relief opportunity for millions of taxpayers.
The Kwong v. United States ruling raised questions about whether the IRS wrongly assessed penalties and interest during the federal disaster period from 2020 to 2023.
Taxpayers who paid late filing, late payment, estimated tax penalties or related interest should review their IRS transcripts. Filing Form 843 before the July 10, 2026 deadline may help preserve refund rights if courts uphold the ruling.
FAQs About IRS Pandemic Penalty Refund
Can taxpayers request refunds for penalties they already paid during the pandemic?
Yes. Taxpayers who already paid qualifying penalties or interest during the covered COVID disaster period may potentially request refunds using IRS Form 843.
Does the IRS automatically notify eligible taxpayers about COVID penalty refunds?
Currently, the IRS is not automatically notifying taxpayers about possible refunds connected to the Kwong ruling. Most taxpayers must review transcripts and file claims themselves.
Can small business owners apply for pandemic-related penalty abatements?
Yes. Small businesses may qualify if they incurred eligible penalties or interest during the covered pandemic period.
How long does the IRS take to process Form 843 claims?
Processing times vary significantly and may take several months or longer, especially because the legal issue remains unresolved.
Are interest charges included in possible IRS refunds?
Potentially, yes. Interest connected to qualifying penalties may also be refundable depending on the taxpayer’s circumstances.
What happens if the government appeals the Kwong ruling?
If the ruling is appealed, refund processing could be delayed while litigation continues. Protective claims help preserve taxpayer rights during that process.
Can taxpayers still qualify if they filed taxes late but already paid the balance?
Possibly. Taxpayers who paid penalties for late filing or late payment during the covered period may still qualify for refunds or abatements.
