A Recent Tax Case May Open the Door to COVID-Era Penalty Refunds

A recent court decision may give some taxpayers a chance to recover IRS penalties and interest paid during the COVID-19 period.

The case is Kwong v. United States, and it deals with how federal tax deadlines should have been handled during the COVID-19 disaster period. In simple terms, the court said that certain tax deadlines may have been automatically postponed for a much longer period than the IRS had previously allowed.

Many individuals and businesses paid penalties or interest for late filings, late payments, estimated tax issues, or other missed tax deadlines during that time. If those deadlines were postponed under the court’s interpretation, some of those penalties and interest charges may not have been proper.

This doesn’t mean the IRS will automatically send refunds, or that every taxpayer qualifies. The government has appealed the decision, so the final outcome is still uncertain. However, time is of the essence because taxpayers need to file a refund or abatement claim by July 10, 2026 to preserve their rights.

What Should You Do Now?

Start by reviewing your IRS records for tax years affected by the COVID-19 period, especially 2019 through 2022. Look for penalties or interest connected to late filing, late payment, estimated tax payments, or other deadline-related issues.

If you paid penalties or interest during that period, talk with your CPA or tax advisor as soon as possible. They can help determine whether filing a protective refund claim makes sense for you. A protective claim is basically a way to say, “I may be entitled to a refund depending on how this case is finally resolved.”

In many cases, taxpayers need to use IRS Form 843 to request a refund or abatement. Because the case is still on appeal, the goal right now is not to assume a refund is guaranteed, but to avoid missing the deadline to make a claim.

Bottom line: If you or your business paid IRS penalties or interest tied to COVID-era tax deadlines, don’t ignore this case. Review your records, speak with a trusted tax professional, and consider whether a protective claim should be filed before July 10, 2026.

Sources Used:

• https://www.taxpayeradvocate.irs.gov/news/nta-blog/tens-of-millions-of-taxpayers-may-be-eligible-for-significant-tax-refunds/2026/04/
• https://www.taxpayeradvocate.irs.gov/news/nta-blog/beyond-penalties-and-interest-how-kwong-may-affect-missed-tax-refunds-part-iv/2026/05/
• https://www.venable.com/insights/publications/2026/06/kwong-update-refund-opportunities-the-july-10
• https://www.journalofaccountancy.com/news/2026/may/covid-19-disaster-relief-case-has-implications-for-timely-refund-claims/