If you paid penalties or interest on your taxes during COVID-19, you may have another refund coming. But there’s a catch: To be eligible, you must file with the IRS before July 10, 2026.
A landmark court decision, Kwong v. United States, we determined that the IRS improperly levied penalties and interest during the period of the COVID-19 crisis, which was officially declared on Jan. 20, 2020, and ended on May 11, 2023.
The plaintiff, Terry Kwong, is suing for a refund of the penalties he paid for the tax years 2007, 2010, 2011, 2015, and 2016. He stated that he should not have paid them because he has the right to an extension under the COVID-19 law and the existing tax deferral laws that affect tax deferrals. disaster has been declared.
The court ruled in his favor, noting that, although a three-year disaster declaration was unprecedented, the language of the tax code was “ambiguous” and the IRS should have extended the deadline from 2020 to July 10, 2023 (60 days after May 11, 2023, when the federal disaster period was declared).
Who is eligible for a refund?
As Erin M. Collins from the National Taxpayer Advocate, an independent organization within the IRS, wrote last week, tens of millions of taxpayers are being assessed for penalties or interest for late filing or payment during the COVID-19 crisis, from individuals and small businesses to corporations, estates and trusts.
If the decision of Kwong v. In the United States (the government will file an appeal), taxpayers will be eligible for a refund if they pay a penalty or interest for:
- Late tax filing
- Failure to pay taxes on time
- Fail to make the estimated tax payments
- Paying interest on excess taxes owed between 2020 and 2023
The easiest way to find that information is to go through the tax files for those years and review whether you paid or were liable for any penalties or interest. You can find that information on your federal income tax returns for each of your online accounts with the IRS.
I qualify. How do I claim a refund?
This is where it gets boring. If the decision is upheld, a refund will not be issued automatically. To request a refund, you will need to mail a special Form 843 by July 10, 2026, to the IRS service center where you would have filed the competing tax return. Collins also recommends sending the claim by certified mail — if it’s delayed or buried in IRS backlog, you’ll have proof you filed it on time.
Why July 10, 2026? Because that day marks three years since the new tax deadline decided in the case of Kwong v. United States.
According to IRS rules, taxpayers must claim a refund or abatement (reduction of what you owe and haven’t paid) within three years from the date they filed their tax return, or two years from the date they paid the tax. Kwong’s decision changed the deadline for taxes and payments you owe from the time of the COVID-19 crisis to July 10, 2023. This revision also moved the three-year window to claim a refund to July 10, 2026.
There are two types of refund claims you can file with the IRS: a statutory refund claim or a secured refund claim.
You can file a legitimate refund claim if you know how much you owe. This type of claim has an expiration date; The IRS must respond within six months, and if the agency refuses a refund, you have two years to sue. If two years have passed, the IRS is not allowed to pay, regardless of whether your claim is valid or not.
On the other hand, a defensive refund claim is often filed when you don’t know how much you’re entitled to because the matter is still wrapped up in a lawsuit — in this case, Kwong’s case — and the IRS can’t act on it until the legal process is resolved. According to Collins, this is the type of form you have to file to get “the COVID money.”
On the National Taxpayer Advocate blog, he explains that a protective refund claim preserves the taxpayer’s rights to a refund while litigation is pending. Because the case is still pending, this extra step protects your claim from expiring while the law goes through the courts – a process that can take years.
He notes that you need to sign and file a Form 843 and recommends that you write “Claim for Protective Reimbursement Pursuant to the Kwong Case” or something to that effect at the top. You don’t need to list what you owe for the form to work, but the form can’t be clear. It must include why you are filing a claim, the tax year(s) you are disputing and what legal issue your claim is about (Kwong’s case), as well as your personal information and taxpayer identification number (TIN). For most people, this is their Social Security number.
You will need to file Form 843 for each tax period you want a refund. For example, if you paid interest or late penalties for the 2019 and 2022 tax years, you will need to file a separate form each year.
“I expect the Justice Department will challenge the decision,” Collins wrote in part 1 of a series of blog posts. “It may take several years until the matter is resolved by the courts.”
In other words, don’t count on getting that money anytime soon. Even if the IRS hasn’t been plagued by understaffing and backlogs, it could be years before you see a check. But if you’re eligible for a refund, it’s important to claim the money before the July 10 deadline. Whether or not the decision stands is up to the courts, and if so, you don’t want to miss out on your piece of the pie.
“A timely claim is more important than a perfect one,” notes Collins. “Claims may be added with more details, but a missed deadline cannot be corrected.”
