COVID Penalty Refunds: Who Qualifies and How to File by July 10

If you paid an IRS late-filing or late-payment penalty on a tax deadline that fell between January 20, 2020 and July 10, 2023, a recent federal court decision may give you a path to a refund, but only if you file a claim by July 10, 2026. The case is Kwong v. United States, decided by the U.S. Court of Federal Claims in November 2025. The court read the federal disaster-postponement statute to mean that pandemic-era deadlines were paused automatically for the entire 3.5-year disaster period. That reading is far broader than the limited relief the IRS provided during the pandemic, and it is the reason a filing window is now closing.

This guide explains what the court actually held, who is potentially covered, which penalties are in scope, and the concrete steps to evaluate and preserve a claim before the deadline. It also makes one thing clear up front: the IRS has appealed, so a refund is not guaranteed. What is available right now is the ability to protect your place in line.

What the Kwong ruling actually held

The Court of Federal Claims held that Internal Revenue Code Section 7508A(d), the provision that governs disaster-related postponements of tax deadlines, required an automatic suspension of federal filing and payment deadlines for the full duration of the COVID-19 federal disaster declaration. Under that reading, any deadline that fell between January 20, 2020 and July 10, 2023 was effectively postponed until after the disaster period ended.

The practical consequence is significant. If a return or payment was not actually late under the court’s interpretation, then the penalties and interest the IRS charged for lateness during that window should not have been assessed. The National Taxpayer Advocate, the independent watchdog inside the IRS, has flagged the same issue and estimated that tens of millions of taxpayers could be affected.

One term worth defining here. A disaster postponement is a delay of a tax deadline that the law grants when a federally declared disaster makes timely filing or payment impractical. The dispute in Kwong was about how long that postponement lasted, and the court concluded it ran the entire length of the COVID-19 declaration rather than the shorter period the IRS applied administratively.

Who potentially qualifies

Eligibility is broad because COVID-19 was a nationwide disaster. The reasoning in Kwong reaches individuals, businesses, trusts, estates, and nonprofits, provided the relevant deadline fell inside the disaster window. The common thread is simple: you paid a penalty or interest tied to a filing or payment deadline between January 20, 2020 and July 10, 2023.

The penalties most clearly in scope are the ones tied to timing:

• Failure-to-file penalties on returns due during the disaster window.
• Failure-to-pay penalties on balances due during the window.
• Underpayment interest and estimated-tax penalties tied to those same deadlines.

Some categories are more complicated and need professional review before filing. Late-filing penalties on certain international information returns, such as Forms 5471, 3520, and 8938, may qualify under the same logic, but the analysis is harder than for ordinary income-tax penalties. Penalties on foreign bank account reports (FBAR, FinCEN Form 114) rest on a different body of law and fall outside the Kwong ruling entirely. If your situation involves those forms, treat the deadline as a reason to get an assessment now, not to file blind.

Why July 10, 2026 is the deadline that matters

The deadline comes from the standard refund-claim rule in IRC Section 6511, which limits refund claims to the later of three years from when the return was filed or two years from when the tax was paid. Under the Kwong reasoning, the disaster period is disregarded when computing that limit, which pushes the effective deadline to July 10, 2026 for most affected taxpayers whose deadlines fell inside the window.

If you paid the penalty later than the original due date, the two-year-from-payment rule may give you more time, so the exact date can vary with your facts. But July 10, 2026 is the date the IRS’s own Taxpayer Advocate and most practitioners are using as the protective benchmark. Missing it generally means the claim is barred regardless of how strong it is on the merits.

What a protective claim is, and why it is the right tool here

A protective claim is a refund claim you file before the statute of limitations runs out, while the underlying legal question is still being decided by the courts. Its purpose is narrow but important: it preserves your right to a refund if the law ultimately settles in taxpayers’ favor, even though no one can collect yet.

That framing fits Kwong precisely. The government has appealed the decision to the U.S. Court of Appeals for the Federal Circuit, and the case could take years to resolve. The IRS has stated that relief is not automatic and has not begun issuing refunds. A protective claim does not force the IRS to pay now. It keeps your position alive so that if the decision stands, you are eligible to recover. Filing one costs relatively little. Not filing forecloses any recovery permanently.

How to evaluate and file a claim

The vehicle is Form 843, the IRS Claim for Refund and Request for Abatement. If you have already paid the penalty, you are requesting a refund. If the IRS assessed the penalty but you have not paid it, you are requesting an abatement. For a deeper walkthrough of the form itself, our Form 843 instructions cover each line and the documentation the IRS expects.

The practical sequence looks like this:

• Pull your IRS account transcripts for tax years 2019 through 2023 through your account at IRS.gov, and flag every penalty and interest entry.
• Map the accrual dates. Charges tied to deadlines between January 20, 2020 and July 10, 2023 are the ones to examine.
• Prepare a separate Form 843 for each tax year and each penalty type. Do not combine years on one form.
• Write a short legal statement citing Kwong v. United States as the basis for the claim, and identify the specific year, penalty type, and amount.
• Mail it by certified mail with return receipt before July 10, 2026 so you have proof of timely filing.

This is a sourcing-and-documentation exercise more than a negotiation. The strength of a protective claim rests on a clean transcript trail and a clear statement of the legal basis, not on argument. The IRS may hold the claim in suspense until the appeal resolves, which is the expected outcome and not a problem.

Pulling your IRS account transcripts for 2019 through 2023 is the first step in spotting penalties tied to deadlines inside the COVID disaster window.

When to handle it yourself and when to get help

For a single year with one straightforward penalty, a protective Form 843 is manageable on your own once you have your transcripts. The IRS has historically removed timing penalties through ordinary channels too, and our guide to IRS penalty abatement explains the First-Time Abatement and Reasonable Cause paths that may apply independently of Kwong.

Larger or more complex exposure changes the calculation. Multi-year penalties, business or partnership filings, international information returns, or combined penalties and interest above roughly $10,000 generally justify a transcript review by a licensed professional before the deadline. Enrolled agents, CPAs, and tax attorneys can represent you before the IRS under power of attorney. If your exposure is large enough that representation makes sense, it is worth understanding how much a lawyer costs for this kind of work before you commit, so the fee is proportional to the potential recovery.

The bottom line on a Kwong claim

If you paid federal penalties or interest on a deadline that fell between January 20, 2020 and July 10, 2023, the decision tool is straightforward. Pull your transcripts, identify the charges inside that window, and decide whether the amount justifies filing. For small single-year penalties, file a protective Form 843 yourself by July 10, 2026. For exposure in the thousands or anything involving business or international filings, get a professional transcript review well before the deadline so there is time to prepare the claim properly. Either way, the action that preserves your rights is filing before the date. Waiting past it removes the option entirely.

Frequently asked questions

Is the refund guaranteed if I file?

No. The government has appealed Kwong, and the IRS has not started issuing refunds. Filing a protective Form 843 preserves your right to a refund if the decision is ultimately upheld. It does not guarantee payment, and the IRS may hold the claim in suspense until the appeal is resolved.

What is the deadline to file?

For most affected taxpayers the deadline is July 10, 2026. The date can vary if you paid the penalty later than its original due date, because a two-year-from-payment rule may give you additional time. July 10, 2026 is the protective benchmark the IRS Taxpayer Advocate and most practitioners are using.

Which penalties might qualify?

Failure-to-file penalties, failure-to-pay penalties, underpayment interest, and estimated-tax penalties tied to deadlines between January 20, 2020 and July 10, 2023 are the clearest candidates. Certain international information-return penalties may qualify but need professional review. FBAR penalties are outside the ruling.

What form do I use?

IRS Form 843, the Claim for Refund and Request for Abatement. File a separate form for each tax year and each penalty type, and include a written statement citing Kwong v. United States as the basis for the claim.

How do I know if I was charged a penalty in that window?

Pull your IRS account transcripts for tax years 2019 through 2023 from your account at IRS.gov. The transcripts list penalty and interest entries with dates, so you can identify charges tied to deadlines inside the disaster period.

Do I need to hire someone to file?

Not for a simple single-year penalty, which you can file yourself once you have your transcripts. Larger exposure, multiple years, business or partnership returns, or international filings generally justify a review by an enrolled agent, CPA, or tax attorney before the deadline.

Does this apply to state tax penalties?

No. Kwong interprets federal tax law. State revenue agencies operate under their own statutes and are not bound by the federal disaster tolling, so state penalties are not covered by this ruling.

What happens if I miss July 10, 2026?

For most taxpayers, missing the deadline means the refund claim is time-barred and the IRS will reject it as untimely regardless of its merits. Because the appeal could take years, filing a protective claim before the date is the only way to keep the option open.