A federal court has ruled that the IRS may have charged some taxpayers penalties and interest it was never allowed to charge during the pandemic. If you paid IRS penalties or interest at any point between January 2020 and mid-2023, you may be able to get some of that money back, but only if you act before July 10, 2026.
TL;DR: A 2025 court decision in Kwong v. United States could mean a refund on COVID-era IRS penalties and interest, but most affected taxpayers need to file a claim by July 10, 2026, to protect that right.
What Happened In The Kwong Case?
In late 2025, a federal court ruled on a case called Kwong v. United States. The court looked at an older tax rule that pushes back IRS deadlines whenever the government officially declares a disaster. The judge decided that this rule covered the entire COVID-19 disaster period, which the government had said ran from January 20, 2020, to May 11, 2023, plus an extra 60 days. That pushes the effective deadline out to July 10, 2023.
This means many tax deadlines that fell during that stretch were not actually late under the court’s reading of the law. If a deadline was not late, then the penalties and interest the IRS charged for missing it may not have been valid in the first place. A similar conclusion came out of an earlier case in the Tax Court, Abdo v. Commissioner, which adds more weight to the argument.
Why Is July 10, 2026 Significant?
Normally, you only have a limited window to ask the IRS for a refund, generally three years from when you filed your return or two years from when you paid, whichever is later. Because the Kwong ruling pushes the relevant deadline out to July 10, 2023, that three-year window closes for many taxpayers on July 10, 2026. A newer law also helps some taxpayers reach back further than the usual two-year limit, so more of what you paid could end up being eligible for a refund.
The IRS Is Still Fighting This
The IRS does not agree with the Kwong decision. The government has already filed an appeal, and the IRS has said publicly that it will not expand penalty relief beyond the standard 60 days on its own. None of that changes the July 10, 2026 deadline. Waiting for the courts to fully settle this could mean losing your chance to file at all.
Who Could This Affect?
The National Taxpayer Advocate, an independent watchdog inside the IRS, has said tens of millions of taxpayers could be affected. That includes individuals, freelancers, real estate investors, small business owners, and even estates and trusts. A few common examples: a freelancer who paid a late-filing penalty tied to self-employment income, a landlord who paid interest on a delayed Schedule E filing, or someone who paid penalties while their account was previously in Currently Not Collectible status.
What Is A Protective Claim?
Because the legal question is still being argued in court, you do not have to wait for a final answer to protect your rights. You can file what’s known as a protective claim. This simply tells the IRS that you believe you are owed a refund for specific years and explains why, even if you cannot yet pin down the exact dollar amount. Filing one now keeps your option open in case the courts ultimately side with the taxpayer.
What To Do Next
Start by requesting your IRS account transcripts for 2019 through 2023 and looking for any penalties or interest charged during that window. Most taxpayers will need to file Form 843 to request a refund or abatement, and since it has to be mailed rather than submitted online, sending it by certified mail with a return receipt is a smart move. Because these claims need to be specific and well documented, having a tax professional review your situation before you file can make a real difference.
JBS Corp works with individuals, freelancers, and real estate investors who want a clear answer on where they stand. Our team can review your transcripts, prepare a properly documented claim, and keep an eye on the appeal as it moves forward. Reach out to our team before July 10, 2026, so you don’t lose the option.
Note: This article is for educational purposes only and does not constitute tax advice. Tax rules, figures, and percentages are subject to change and this article may not be fully up to date; visit IRS.gov for the most current information and consult a tax professional for guidance specific to your situation.
