Tens of Millions of Taxpayers May Be Eligible for Significant Tax Refunds – If They Act by July 10 (Part I) – Image for illustrative purposes only (Image credits: Unsplash)
A federal court ruling from late 2025 has opened the door for tens of millions of U.S. taxpayers to recover penalties and interest charged by the IRS during the COVID-19 disaster period. This relief stems from an interpretation of tax postponement rules that extended deadlines for filing and payments far longer than many realized. With the claim window closing on July 10, 2026, affected individuals and businesses face a narrow opportunity to act. The decision underscores how prolonged disruptions from the pandemic continue to influence tax outcomes years later.
The Legal Shift from the Kwong Ruling
The case of Kwong v. United States, decided in November 2025, examined Internal Revenue Code section 7508A(d). That provision automatically postponed tax filing and payment deadlines during a federal disaster declaration and for 60 days afterward. For COVID-19, the disaster ran from January 20, 2020, to May 11, 2023, pushing the effective deadline to July 10, 2023. The court held that no penalties or interest should apply to obligations due within that roughly 3½-year span.
The IRS had taken a narrower view, assessing late-filing and late-payment charges regardless. This ruling challenges that approach, potentially invalidating millions of such assessments. An appeal from the government remains possible, which could prolong uncertainty. Taxpayers now weigh the implications for returns filed or payments made during the height of the crisis.
Who Might See Refunds or Abatements
A broad range of taxpayers falls under this umbrella, from individuals to small businesses, estates, trusts, and corporations. Penalties for late income tax filings, employment taxes, estimated payments, estate and gift taxes, excise taxes, and even certain international information returns could qualify. Interest charges tied to those penalties may also be refundable, along with overpayment interest from 2020 through 2023.
Low- and moderate-income filers, often without professional help, stand particularly at risk of missing out. Many faced financial strains during the pandemic, making these recoveries especially valuable. The scale affects everyday Americans who filed late amid lockdowns and economic upheaval, not just high-profile cases.
Steps to Protect Your Refund Rights
Relief requires proactive steps, as the IRS does not adjust accounts automatically. Most taxpayers must submit Form 843, Claim for Refund and Request for Abatement, within three years of filing a return or two years of payment – aligning with the July 10, 2026, cutoff for many. Those in audits, appeals, or court may have extended windows but should factor this into ongoing matters.
Given the ongoing litigation, protective claims offer a safeguard. These filings preserve rights without needing precise calculations, as long as they clearly reference the Kwong case, specify affected years, and describe the contingency. The IRS Internal Revenue Manual outlines requirements: identify the issue, note uncertainties, and target specific periods. Mark the form prominently, such as “Protective Claim per Kwong Ruling,” and mail it certified for proof.
Paper submission poses hurdles – no electronic option exists, slowing processing and risking delays if volumes surge. Taxpayers should retain mailing receipts, as confirmation lags. For those with assessed but unpaid amounts, abatement requests follow similar paths. Practitioners advise reviewing account transcripts early to spot eligible charges.
This process demands attention to detail, especially with the deadline approaching. Millions could file, straining IRS resources and extending wait times for resolutions.
Fairness Concerns and Paths Forward
Without broader intervention, outcomes may divide the informed from the unaware. Tax professionals can guide clients swiftly, while others learn too late. This disparity clashes with Taxpayer Bill of Rights principles, including being informed and paying only what is owed.
The Taxpayer Advocate Service urges IRS steps: widespread publicity, a six-month claim extension under IRC section 6081, systemic relief to bypass individual filings, and an electronic portal for submissions. Congressional outreach and media coverage could amplify awareness. Such measures would promote equity across income levels and taxpayer types.
As the July 10 deadline nears, the focus remains on bridging information gaps from a once-unprecedented crisis. COVID-19’s tax echoes highlight the need for accessible relief in complex systems. Taxpayers who review records now position themselves best, regardless of final court outcomes. Proactive claims ensure no one forfeits potential recoveries through inaction alone.
