Tens of millions of Americans may be sitting on money the federal government wrongly took from them during the pandemic — and most of them have no idea.
A little-known court ruling from late last year has cracked open a window that tax experts are calling one of the most significant refund opportunities in modern IRS history, but that window closes in just over two months.
The IRS Collected Billions During COVID: It Might Return Them
The story begins with a November 2025 decision by Judge Molly Silfen of the U.S. Court of Federal Claims in a case called Kwong v. United States. The ruling turned on a deceptively simple question: for how long did the COVID-19 federal disaster declaration actually suspend tax filing and payment deadlines?
The IRS had long argued the answer was roughly one year. The court said otherwise. Under the statutory language, Silfen found, those deadlines were automatically paused for the entire duration of the disaster period — from January 20, 2020, through May 11, 2023, plus an additional sixty days added by tax law, pushing the effective endpoint to July 10, 2023. That is three and a half years, not one.
Billions of Dollars to Be Returned to Taxpayers
If the deadlines were suspended for that entire stretch, then penalties the IRS assessed for late filing, late payment, and missed estimated tax payments during that window were legally improper. So was any interest that began accruing during the same period. The IRS collected billions under assumptions a federal court has now called into question.
The numbers are staggering. In fiscal year 2022 alone, the agency levied more than twelve million estimated-tax penalties and over sixteen million failure-to-pay penalties totaling more than 12 billion dollars. The IRS had previously issued a narrower relief notice in 2022 that returned about 1.2 billion dollars to roughly 1.6 million taxpayers, but tax professionals say the legal theory now in play reaches far more people and far more money.
One Case Based in Another: The IRS Must Be in Trouble
The Kwong decision builds on a 2024 U.S. Tax Court ruling in Abdo v. Commissioner, which reached a similar conclusion. Together the two decisions represent a judicial rejection of the regulatory framework the IRS had built around pandemic-era tax relief.
Legal observers also connect both rulings to the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which ended the so-called Chevron doctrine. Courts are no longer required to defer to federal agencies on ambiguous statutory language. When judges read the tax code themselves, at least in these cases, they have sided with taxpayers.
National Taxpayer Advocate Erin Collins, who leads the Taxpayer Advocate Service, an independent watchdog within the IRS, has been unusually direct in her public warnings about what comes next. She described the situation as a “major refund opportunity” but made clear the relief is not automatic.
The Government Will Not Be Mailing Checks
Taxpayers who believe they were overcharged must file their own claims, and most of them have until July 10, 2026 to do so. After that date, the statute of limitations will have run out for a large portion of those who might otherwise qualify.
Collins has also been candid about the equity problem embedded in this situation. “My overriding goal is to get the word out to as many taxpayers as possible and to avoid disparate results between the ‘well advised’ and the unaware,” she wrote in a recent blog post. Without broader outreach, the people most likely to collect refunds are those with accountants and tax attorneys who keep up with litigation developments. Everyone else may never find out.
The process itself adds another obstacle. Qualifying taxpayers must file IRS Form 843, a paper document, by mail. There is no electronic option. The IRS does not send confirmation of receipt. Collins has urged the agency to build an online portal, request a six-month extension of the filing deadline, and explore whether it can provide systemic relief without requiring individual claims. She has also called on Congress and the media to help spread the word.