Three Key Points:
Tens of millions of taxpayers may be owed automatic refunds on late-filing penalties and interest from the COVID disaster period under a recent court ruling.
The IRS is not proactively issuing these refunds, meaning most eligible individuals must file a claim using paper Form 843 by July 10, 2026.
Low- and moderate-income taxpayers who lack professional representation face the highest risk of missing out on this potential financial relief.
A groundbreaking court decision has opened the door for an estimated tens of millions of Americans to claim significant refunds on penalties and interest charged by the IRS during the COVID-19 federal disaster period. The ruling, known as Kwong v. United States, argues that under existing tax law, filing and payment deadlines were automatically postponed from January 20, 2020, through July 10, 2023. If that interpretation stands, the IRS should never have assessed late penalties or related interest for that entire three-and-a-half-year window. However, the agency has signaled disagreement, and legal experts expect an appeal from the Department of Justice.
For everyday taxpayers, this means money that was taken as penalties for missed deadlines could be coming back, but only if they ask for it. The IRS will not issue these refunds automatically. Most people must submit a claim for refund or abatement by July 10, 2026, using Form 843. The clock is ticking, and the process remains stubbornly old-fashioned. Unlike most modern tax filings, Form 843 cannot be submitted online. It must be printed, filled out on paper, and physically mailed. Tax professionals recommend sending it via certified mail to prove timely submission, as lost or delayed claims are a real risk.
The scope of who may be affected is stunningly broad. Individuals, small business owners, large corporations, estates, and trusts could all be eligible. The ruling touches income, employment, estate, gift, and excise taxes. Even taxpayers who filed late international information returns, which often carry steep penalties even when no tax is owed, may have grounds for relief. Particularly vulnerable are low- and moderate-income families who are least likely to have a tax professional following these complex legal twists. Without action, many will unknowingly leave money on the table.
Because the law is still unsettled, tax experts are urging a protective claim strategy. A protective claim preserves a taxpayer’s right to a refund while courts continue to argue over the final outcome.
You do not need to calculate the exact refund amount upfront. Instead, you file Form 843 with a clear notation such as “Protective Refund Claim Pursuant to Kwong Case” across the top, describe the contingency, and list the tax years involved. The IRS then holds the claim in suspense until the legal dust settles. This maneuver is critical for anyone who wants to avoid losing their chance due to the standard three-year statute of limitations.
For those already under IRS examination, in appeals, or in litigation, different timelines may apply. But for the vast majority of taxpayers, July 10, 2026, is the hard deadline. The IRS faces an administrative challenge of its own: processing potentially millions of paper-filed claims in a system already strained for resources.
Delays, lost documents, and inconsistent treatment are all real possibilities. Many advocates argue the IRS should immediately create an electronic filing option for Form 843, bypassing the paper bottleneck that disproportionately harms unrepresented taxpayers. Until that happens, mailing a certified paper claim remains the only path to preserving rights under the Kwong decision.
