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Tens of millions of Americans may be owed refunds for IRS penalties they paid during the COVID-19 pandemic — but the deadline to claim most of them is July 10, 2026. The refunds are not automatic. You have to file a claim. Here is who qualifies, how much you might get back, and exactly how to file before the deadline.
What Happened
In November 2025, a federal court ruled in Kwong v. United States that the IRS should not have assessed certain penalties and interest for late filings and payments from January 20, 2020 through July 10, 2023 — the COVID-19 federal disaster period (through May 11, 2023) plus an extra 60 days.
The ruling is based on an interpretation of a tax code provision that governs postponed deadlines during federal disaster declarations. The court found that the disaster postponement was mandatory and automatic — meaning returns and payments that fell within the covered period were never technically “late,” so the penalties the IRS charged were invalid.
In fiscal year 2022 alone, the IRS levied more than 12 million estimated-tax penalties and over 16 million failure-to-pay penalties totaling more than $12 billion. National Taxpayer Advocate Erin Collins called this a “major refund opportunity” in an April 2026 blog post and urged taxpayers to act before the deadline.
Who Qualifies
You may qualify if you paid IRS penalties or interest for any of the following during January 20, 2020 through July 10, 2023:
- Failure-to-file penalty (5% of unpaid taxes per month, up to 25%)
- Failure-to-pay penalty (0.5% of unpaid balance per month, up to 25%)
- Estimated tax payment penalties (for underpayment of quarterly taxes)
- Interest charged on those penalties
This applies to individual taxpayers, self-employed people, businesses, partnerships, S corporations, and trusts. The National Taxpayer Advocate specifically noted: “This issue is widespread and not limited to a small or specialized group of taxpayers.”
You do not qualify if you never paid penalties to the IRS during this period, or if you already received a refund under the narrower 2022 IRS Notice 2022-36 program (which automatically refunded penalties to about 1.6 million taxpayers for 2019 and 2020 returns only).
How Much Could You Get Back
It depends on how much you were penalized. Tax professionals estimate that a typical individual taxpayer who was penalized for a late payment on a $5,000 tax liability during the pandemic period could recover more than $1,000 in penalties and interest combined.
Small business owners and self-employed individuals who struggled with quarterly estimated tax payments during 2020-2023 may have paid the highest penalties and could see the largest refunds. Partnerships and S corporations should also review penalties assessed on informational returns.
There is no guarantee you will receive a refund — the Kwong ruling is not yet a final, appealed judgment. But the National Taxpayer Advocate’s public endorsement of filing claims before July 10 is a strong signal that the legal theory is solid enough to act on.
How to File a Claim Before July 10
Refunds are not automatic. You must take action.
Step 1: Pull your IRS account transcripts. Log in to irs.gov/transcript and download your Account Transcript for each tax year from 2020 through 2023. Look for penalty and interest assessments — these appear as transaction codes 170 (estimated tax penalty), 196 (interest), 276 (failure to pay penalty), and 290 or related codes.
Step 2: Calculate what you were charged. Add up all penalty and interest charges from January 20, 2020 through July 10, 2023 across all applicable tax years.
Step 3: File Form 843 (Claim for Refund and Request for Abatement). This is the IRS form for requesting a refund or abatement of taxes, penalties, or interest you believe were incorrectly assessed. On Form 843:
- Enter the tax year and type of tax involved
- Enter the amount of penalty and interest you are claiming
- In the explanation section, cite Kwong v. United States (No. 1:21-cv-00951) and IRC Section 7508A as the legal basis
- Attach copies of any IRS notices showing the penalty assessments
Step 4: Mail by certified mail before July 10, 2026. The National Taxpayer Advocate specifically recommends certified mail so you have proof of the filing date. Mail to the IRS center for your state — find the address in the Form 843 instructions at irs.gov.
Filing electronically is not yet available for Form 843. The National Taxpayer Advocate has called on the IRS to build an electronic portal given the expected volume of claims, but as of May 2026 none exists.
What Happens After You File
IRS processing times for Form 843 claims are typically several months. The IRS may approve your claim, deny it, or partially approve it. If denied, you have the right to appeal. Given that the underlying legal question in Kwong is still working through the courts, some claims may be held pending a final ruling.
This is not a guaranteed refund — it is a claim based on a strong but not yet final legal theory. The risk of filing is minimal: if the IRS denies the claim, you are in the same position you are in today. The risk of not filing is potentially losing hundreds or thousands of dollars when the July 10 three-year statute of limitations expires.
If This Feels Complex, See a Tax Professional
For simple cases (one or two years of penalties, straightforward individual returns), filing Form 843 yourself is manageable. For complex situations — multiple business entities, large penalty amounts, or penalties across many years — a CPA or enrolled agent familiar with the Kwong ruling can file on your behalf and maximize the claim. Given the potential refund amounts, a professional fee is often worth it.
Quick Summary
- Who qualifies: Anyone who paid IRS penalties or interest for late filing/payment during January 20, 2020 through July 10, 2023
- Deadline: July 10, 2026 (refunds not automatic — you must file)
- How to claim: File IRS Form 843 by certified mail citing Kwong v. United States and IRC Section 7508A
- How much: Varies — could be hundreds to thousands of dollars depending on your penalties
- Risk of filing: Minimal — worst case is the claim is denied
Sources: CNBC Kwong v. United States reporting May 2026; Fortune IRS COVID refund analysis May 2026; National Taxpayer Advocate Erin Collins blog post April 2026; IRS Form 843 instructions. The Kwong ruling is not yet a final appellate judgment. Consult a tax professional before filing. This article is for informational purposes only and does not constitute tax or legal advice.
