Tens of millions of taxpayers — individuals, small businesses, and corporations alike — may have a legal basis to recover penalties and interest the IRS collected during the pandemic. A federal court ruling has opened the window. It closes July 10, 2026.
Last November, a federal judge quietly changed the math on years of IRS penalty assessments. The ruling in Kwong v. United States, 179 Fed. Cl. 382 (Nov. 25, 2025), turned on a single question: when the federal government declares a disaster, does that automatically pause tax deadlines for everyone — or just for some?
The court said everyone. Under Internal Revenue Code § 7508A(d), filing and payment deadlines had to be postponed for the full length of the COVID-19 disaster period, plus 60 days. That declaration ran from January 20, 2020, through May 11, 2023. With the 60-day add-on, the real deadline for pandemic-era returns was July 10, 2023.
Which means the IRS was wrong to charge penalties before that date. And wrong to collect interest on those penalties. For 3.5 years’ worth of assessments, across tens of millions of accounts.
Who may be entitled to money back from the IRS?
The eligibility pool is unusually broad. Individuals, small businesses, large corporations, estates, trusts — anyone assessed a penalty or interest charge between January 20, 2020, and July 10, 2023, has a plausible claim. Tax years 2019 through 2022 are the ones in play. Failure-to-file penalties, failure-to-pay penalties, and underpayment interest are all on the table.
For most individual filers, that might mean a few hundred dollars. For businesses that ran into real cash problems during lockdowns and deferred payments for months, the number climbs fast. Western Digital is currently in court seeking recovery of nearly $21 million in interest alone — interest the company says was charged during a tax dispute that dragged through the pandemic years.
National Taxpayer Advocate Erin M. Collins has flagged a specific concern about who gets left behind here. “Many taxpayers affected by this issue have low and moderate incomes,” she wrote in a public blog post. “These taxpayers are less likely to have professional representation and to learn about complex legal developments like this one. As a result, they face a greater risk of missing the opportunity to claim refunds to which they may be entitled.”
Why the July 10 date is not negotiable
Under IRC § 6511, refund claims have a statute of limitations: three years from when the return was filed, or two years from when the tax was paid, whichever comes later. Because Kwong repositions July 10, 2023, as the operative deadline for pandemic-era obligations, the three-year window closes on July 10, 2026.
There is a narrow exception worth knowing. A taxpayer who paid a penalty as recently as July 1, 2025, would have until July 1, 2027 under the two-year-from-payment rule. But that only applies when that date falls after July 10, 2026 — and most people’s payments were made years earlier. For the overwhelming majority of filers, July 10 is final. Let that pass, and no court ruling, however favorable to taxpayers, can recover that money.
The IRS is fighting this, which is exactly why you need to file now
The IRS disagrees with the Kwong decision. The Department of Justice is expected to appeal, and the litigation could stretch for years before any appellate court delivers a definitive answer. Refunds are not being automatically issued. The agency is not sending letters to affected taxpayers.
This is where a protective refund claim becomes essential. It is a formal filing that tells the IRS: I am asserting this right now, before the clock runs out, even while the underlying legal question is still being argued. The IRS does not have to grant it immediately. It just has to keep the matter open.
Not filing at all closes the door permanently. Filing preserves every option, and costs nothing beyond the effort of doing it.
How to actually do this
Pull your IRS account transcripts for tax years 2019 through 2022. You can get them through your Individual Online Account at IRS.gov or by calling 800-908-9946 for automated delivery — mail takes five to ten days. Go through each year and flag any penalty or interest entries that fall within the January 20, 2020, to July 10, 2023, window.
Then fill out Form 843, Claim for Refund and Request for Abatement. Write “Protective Refund Claim Pursuant to Kwong v. United States” at the top — that language is what makes this a protective claim and puts it in the right legal category. File a separate Form 843 for each tax year; one form does not cover multiple years.
Include a short-written statement citing IRC § 7508A(d) as the statutory basis, and also reference P.L. 119-64 (enacted December 26, 2025), which provides an independent legal ground requiring the IRS to treat disaster-period postponements as deadline extensions for refund lookback purposes. Two legal hooks are better than one.
Send everything by certified mail with return receipt to the IRS service center that handles your Form 1040. Keep that tracking receipt. It is your proof of timely filing if the matter gets contested later.
