Summary (tl;dr)

Millions of U.S. taxpayers may be eligible to claim refunds for penalties and interest erroneously assessed by the IRS during the COVID-19 pandemic, but they face a critical July 10, 2026, deadline to file claims.

Essential Background

During the COVID-19 pandemic, a federal disaster declaration was in effect from January 20, 2020, to May 11, 2023. Under existing tax law (IRC Section 7508A), such disaster declarations are intended to automatically postpone certain tax filing and payment deadlines. However, the IRS initially maintained a narrower interpretation, continuing to assess penalties and interest on many taxpayers for missed deadlines within this period.

The Full Story

Recent federal court rulings, notably Kwong v. United States in November 2025 by the U.S. Court of Federal Claims, and Abdo v. Commissioner in 2024 by the U.S. Tax Court, have determined that the IRS's interpretation was incorrect. These courts found that the disaster relief provisions automatically suspended tax deadlines for the entire COVID-19 emergency period, plus an additional 60 days, effectively extending many deadlines until July 10, 2023. Consequently, penalties and interest charged by the IRS between January 20, 2020, and July 10, 2023, may have been invalid. Taxpayers now have a looming deadline of July 10, 2026, to file claims for these refunds or penalty abatements, typically using Form 843, although the Justice Department is expected to appeal the Kwong decision.

Why It Matters

This situation presents a significant financial recovery opportunity for potentially tens of millions of taxpayers who were incorrectly penalized or charged interest during the pandemic. Estimates suggest these unclaimed refunds could total billions of dollars. The National Taxpayer Advocate, Erin Collins, has voiced concerns that many taxpayers remain unaware of this opportunity, risking that the deadline will pass quietly for those without professional tax advice. This highlights a potential disparity where informed taxpayers may recover funds while others miss out, prompting calls for the IRS to take broader action to notify affected individuals and simplify the claims process, as currently, there is no electronic filing option for Form 843.

Geographic Location

• Washington, D.C., District of Columbia, United States (federal court rulings on COVID-era tax penalties and IRS operations)