Turns out the Internal Revenue Service (IRS) might have been charging people penalties and interest during the pandemic that it had no legal right to collect. And now a federal court has said as much.
The case is Kwong v. United States, decided November 2025. It’s not a small thing. What the judge found is that the IRS ignored its own deadline extensions under a disaster relief law. You’ve got Section 7508A(d) of the tax code – that’s the one that lets the government push filing dates when things go sideways. And COVID was about as sideways as it gets.
Millions Paid Late Fees the IRS Maybe Couldn’t Legally Take
From January 20, 2020, until May 11, 2023, the federal government treated the pandemic as a continuous disaster period. Under the law, the IRS was supposed to tack on another 60 days after that. So effectively, deadlines moved to July 10, 2023.
But the agency didn’t fully apply that timeline. It kept slapping people with late fees and interest as if nothing had changed. Already, big money is moving.
A Lawsuit Settled It All
Western Digital filed a claim asking for over $20 million back. That’s just interest they paid. But this isn’t only for corporations. Ordinary people who paid any penalty or interest between January 2020 and July 2023 could be in line for a refund.
Think about what that covers. Late payment penalties. Failure-to-file fees. Underpayment interest. Even if you eventually settled your full tax bill, but part of what you paid included those extra charges from that window – you might qualify.
That means retirees who missed estimated payments. Freelancers who filed late because they were sick. Small business owners who just couldn’t keep up during lockdowns.
One tax preparer I spoke with said most clients have no idea this is even an option. “They assume once they paid the IRS, it’s over,” she told me. “But the law is the law. If the IRS didn’t follow it, you can ask for your money back.”
You Have to Ask: The Time is Running Out to Claim the Refund
And you don’t have forever. Standard rules give you three years from when you filed your return, or two years from when you paid the tax – whichever comes later – to file a claim. Because the extended pandemic deadline landed on July 10, 2023, a lot of people will hit a wall around July 10, 2026. Wait past that, and the statute of limitations shuts the door.
There’s another wrinkle. The IRS could appeal the Kwong decision. If that happens, refunds might get delayed or the ruling could get narrowed. That uncertainty is exactly why some tax pros are telling clients not to sit around.
What Do You Actually Have to Do?
First, pull your IRS tax transcripts. You can get them online through the IRS transcript tool or by calling 800-908-9946. Look for any penalties or interest charged between January 20, 2020, and July 10, 2023. If you see them, you file Form 843. That’s the claim form for refunds of penalties and interest. Attach a short note mentioning Kwong and the extended disaster period.
Is it a sure thing? No. Courts can be unpredictable. But the legal reasoning is solid, and the window is real. Millions of Americans paid the IRS more than they should have during the pandemic. A judge just said those payments might not have been legal. Getting that cash back isn’t guaranteed – but not trying almost certainly leaves it on the table. And for a lot of households right now, every dollar counts.
