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Quick Info:
- A federal court ruled the IRS had no legal right to charge penalties during the COVID-19 disaster period (Jan. 20, 2020 to May 11, 2023)
- Over $12 billion in penalties were collected anyway, affecting tens of millions of Americans
- Relief is not automatic, so most taxpayers must file Form 843 by July 10, 2026 or lose their claim permanently
IRS tax refund claims tied to the COVID-19 pandemic era are now at the center of a major legal development that could put money back in the pockets of tens of millions of Americans. A federal court ruled that tax deadlines were effectively paused for the entire duration of the COVID disaster period, from January 20, 2020 through May 11, 2023, plus an additional 60 days. That means penalties charged for late filing or payment during that window may have been collected without legal standing. The IRS penalty refund window closes on July 10, 2026, and anyone who does not file a claim by then is likely to lose their right to one permanently. The COVID tax refund situation affects individuals, small businesses, large corporations, estates, and trusts, and the tax return deadline for filing a claim is approaching fast.
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How to Claim Your IRS COVID Tax Refund Before the July 10 Cutoff
What the Kwong Decision Actually Says
The legal basis for all of this is a November 2025 ruling in Kwong v. United States, decided by the U.S. Court of Federal Claims. Terry Kwong, a California man who co-owned a real estate business, challenged the IRS in court over penalties assessed during the pandemic years. Judge Molly Silfen sided with him, ruling that the tax code’s disaster relief provision, IRC Section 7508A(d), automatically postponed all filing and payment deadlines for the full COVID-19 disaster period and an additional 60 days after it ended.
The government’s position has been that the law was not meant to work that way. Kenneth Kies, the Treasury Department’s top tax-policy official and also the acting IRS chief counsel, said the ruling “is a misreading of the plain language of the statute,” and added that the government “will continue to defend the statutory language as written.” An appeal by the Department of Justice is widely expected.
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Still, until a final determination is made, the clock is ticking. Taxpayers who do not file a claim by July 10, 2026 may be permanently barred from recovering anything.
Who Could Be Owed Money
The scope of this is significant. In fiscal 2022 alone, the IRS imposed more than 12 million estimated-tax penalties and more than 16 million failure-to-pay penalties totaling more than $12 billion. Under the Kwong ruling’s reasoning, a large portion of those penalties and associated interest may not have been legally enforceable.
Taxpayers who could be affected include those who were assessed penalties for:
- Failing to file tax returns on time between January 2020 and July 2023
- Failing to make tax payments on time during that period
- Underpaying estimated taxes
- Accruing interest on balances during the COVID disaster window
National Taxpayer Advocate Erin Collins wrote:
“This issue is widespread and not limited to a small or specialized group of taxpayers. Impacted taxpayers represent a broad cross-section of the public, including individuals, small businesses, large corporations, estates, and trusts.”
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How to Find Out If You Qualify
Start by pulling your IRS tax account transcript to check whether you qualify for an IRS penalty refund. The transcript shows each year’s tax information, including every penalty and interest charge the IRS hit you with, and when. You can grab it online through the IRS Individual Online Account portal, request it by mail on the IRS website, or call the automated phone line at 800-908-9946.
Jon Wasser, a partner at Fox Rothschild who focuses on tax issues, told USA TODAY that taxpayers need to check their records to see if penalties or interest were levied during the filing pause, noting they can do so either through a tax professional or by reviewing the transcript directly.
Dave Bohrman, co-founder and vice president of marketing at Tax Guard, cautioned that:
“This is a situation where a technical tax ruling could have real taxpayer impact, but it’s not as simple as ‘the IRS owes everyone money. The opportunity depends on whether someone was actually assessed penalties during the COVID period, and that’s where it gets complicated.”
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Filing Form 843 Before the Tax Return Deadline
Most taxpayers will need to file Form 843, Claim for Refund and Request for Abatement, to preserve their rights. The form must be submitted on paper, as electronic filing is not currently available for this type of claim. The National Taxpayer Advocate has urged the IRS to create an electronic submission option, but right now, paper is the only route.
Taxpayers are advised to write “Protective Refund Claim Pursuant to Kwong Case” across the top of the form and to specify that the claim is tied to Section 7508A(d) and the COVID-19 disaster period. Since this is a protective claim, the exact refund amount does not need to be calculated. The point is to preserve the right to a refund while the courts work through the legal questions.
Sending the form by certified mail is also strongly recommended, so there is documented proof of timely submission in case anything gets lost.
Alyssa Whatley, a South Carolina-based attorney at Frost Law, described the current situation as “a mad dash,” adding:
“We don’t want to miss this deadline for our taxpayers that have significant savings.”
She noted that she is handling individual claims as high as $600,000 and business claims reaching $2 million.
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What Happens If You Miss It
Missing July 10, 2026 almost certainly means losing any chance at a COVID tax refund. The three-year statute of limitations for refund claims is tied to the July 10, 2023 effective filing date established by the Kwong decision, which means the window closes exactly three years later.
Mark Gallegos, a CPA and partner with Porte Brown, put it plainly:
“Refund claims are generally governed by statute-of-limitations rules, so taxpayers do not have an unlimited amount of time to act.”
He also noted that “the number of taxpayers who will actually recover money is likely much smaller than the headlines suggest,” pointing out that not everyone incurred penalties, and not everyone who did will have enough at stake to justify the effort.
For those with larger compliance issues during the COVID years, though, the amounts can be substantial. Bohrman summed up the risk clearly:
“The biggest risk is that taxpayers who may qualify simply never check.”
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The National Taxpayer Advocate has called on the IRS and Congress to take action to ensure equal treatment between taxpayers who have professional advisors and those who do not. Without some form of systemic relief, the outcome may disproportionately favor those wealthy enough to have legal representation, while low- and moderate-income Americans miss out entirely through no fault of their own.
FAQ:
Q1: How long does the IRS take to process a refund?
The IRS issues 9 out of 10 refunds within 21 days for taxpayers who e-file and choose direct deposit. Paper returns take between 4 and 12 weeks to process. Starting in 2026, the IRS eliminated paper checks for most filers, making direct deposit the standard method. Taxpayers can check their status 24 hours after e-filing using the Where’s My Refund tool.
Q2: How do I check my IRS refund status?
To check your IRS refund status, visit the Where’s My Refund tool at irs.gov/refunds or download the IRS2Go app. You will need three pieces of information:
- Your Social Security number or ITIN.
- Your filing status.
- The exact refund amount shown on your return.
The tool updates once per day, starting 24 hours after you e-file or 4 weeks after mailing a paper return. It shows three stages: return received, refund approved, and refund sent.
Q3: How much tax will I get back if I earn $100,000?
The answer depends on your filing status, deductions, and how much was withheld from your paychecks throughout the year. The average IRS tax refund in 2026 is $3,397, up 11.2% year over year, according to IRS filing season statistics. Single filers earning $100,000 with the standard deduction typically break even or owe a small amount. Joint filers at the same income with children can receive refunds of $2,000 to $4,000 or more depending on credits such as the Child Tax Credit, which increased to $2,200 per child under the One Big Beautiful Bill Act.
