Millions may qualify for 'significant' IRS refunds from COVID-era, but deadline looms: Advocate – Image for illustrative purposes only (Image credits: Pexels)
Struggling families and small businesses hit hard by the pandemic could soon see financial relief from the IRS in the form of refunded penalties and interest. Recent federal court rulings have opened the door for tens of millions of taxpayers to challenge assessments tied to late filings and payments during the COVID-19 disaster period.[1][2] However, this opportunity requires prompt action, as a key filing cutoff approaches in early July.
Court Rulings Reshape Pandemic Tax Relief
The U.S. Court of Federal Claims delivered a pivotal decision in November 2025 in Kwong v. United States. That ruling interpreted a tax code provision, IRC Section 7508A(d), as automatically extending filing and payment deadlines across the entire COVID-19 federal disaster declaration.[1] The disaster period ran from January 20, 2020, through May 11, 2023, with an additional 60 days tacked on, pushing the effective end to July 10, 2023.
Under this view, any deadlines falling within that nearly 3.5-year window were not late. Penalties for failure to file returns, pay taxes, or make estimated payments – and the interest that accrued on them – should never have been imposed. The IRS had issued multiple postponements during the crisis but did not abate these charges across the board. The government disputes this broad interpretation and plans to appeal, leaving the final outcome uncertain for years.[2]
Who Faces the Greatest Impact
A wide swath of taxpayers could benefit, from individuals and families to small businesses, large corporations, estates, and trusts. This spans income taxes, employment taxes, estate and gift taxes, and even excise taxes. Low- and moderate-income households, often without tax professionals, stand at highest risk of missing out.[1]
International information returns also factor in, where penalties apply regardless of tax owed. For many, these refunds represent meaningful cash amid lingering economic pressures. The National Taxpayer Advocate Service estimates tens of millions fit the profile, though exact numbers remain unclear without IRS data.
Steps to Secure Potential Refunds
Taxpayers must file a claim to trigger any relief; nothing happens automatically. The process starts with Form 843, Claim for Refund and Request for Abatement, submitted on paper – no electronic option exists.[2] Certified mail provides proof of timely submission, given processing backlogs.
- Review IRS notices or transcripts for penalties and interest assessed from 2020 to 2023.
- Prepare Form 843, detailing the Kwong basis and affected years; protective claims work if exact amounts are unknown.
- Mail to the proper IRS service center by July 10, 2026.
- Consult a tax professional, especially if under exam or in appeals.
Protective claims suspend until courts resolve the litigation, preserving rights without immediate payment demands.
Why the July 10 Deadline Looms Large
Claims generally fall due within three years of filing a return or two years of payment, but the Kwong timeline sets July 10, 2026, as the critical marker for most. National Taxpayer Advocate Erin M. Collins highlighted this in a recent blog post, urging action to avoid unequal outcomes.[1]
She noted the burden falls heaviest on the unrepresented: “Many taxpayers affected by this issue have low and moderate incomes. These taxpayers are less likely to have professional representation and to learn about complex legal developments like this one.”[1] Paper filing exacerbates delays, and without IRS outreach, billions could go unclaimed.
Calls for Broader IRS Action
Collins pressed the IRS to prioritize Taxpayer Bill of Rights principles, including fair treatment and clear information. She recommended publicizing the issue widely, granting a six-month extension, offering systemic abatements, and launching an electronic portal.[1] Congress could authorize retroactive fixes if needed.
Until then, proactive steps rest with taxpayers. For those navigating post-pandemic recovery, checking old IRS accounts now could unlock vital relief before the window closes.
