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)
Financial pressures linger for many families and businesses years after the COVID-19 disruptions eased. A recent federal court ruling now offers a pathway for tens of millions to recover penalties and interest the IRS imposed on late filings and payments during that chaotic period. Taxpayers face a firm deadline of July 10, 2026, to file claims, or they risk forfeiting potential refunds entirely.
The Kwong Ruling Reshapes Disaster Relief Rules
Federal Circuit Court Judge Kwong delivered a pivotal decision in November 2025 that interpreted tax code provisions on disaster postponements. The ruling examined Internal Revenue Code Section 7508A(d), which automatically extends filing and payment deadlines from the start of a federal disaster declaration through its end, plus 60 additional days. For the COVID-19 emergency, declared on January 20, 2020, and lasting until May 11, 2023, this created a postponement window extending to July 10, 2023.
Courts determined that returns or payments made anytime within this 3½-year span were not late, nullifying related penalties and interest. The government contested this broad application, arguing for narrower relief. An appeal seems likely, which could prolong uncertainty for years. Still, the decision’s plain-language reading has opened doors for widespread challenges to IRS assessments.
A Broad Impact Across Taxpayer Groups
This development affects a vast array of filers, from individuals and small businesses to estates, trusts, and corporations. Penalties tied to income, employment, estate, gift, and excise taxes fall under scrutiny, along with late international information returns that often carry hefty fines even without tax owed. Low- and moderate-income households, least likely to have tax advisors, stand particularly vulnerable to missing out.
Practitioners note that even pre-existing delinquencies might qualify for suspended accruals during the disaster window, though regulations like Treasury Regulation Section 301.7508A-1(f) Example 4 suggest limits. The ruling did not directly tackle such cases, leaving room for debate. Overall, millions who paid or still owe these charges could see significant reductions, providing timely relief amid ongoing economic strains.
Steps Taxpayers Must Take to Secure Refunds
Relief requires proactive steps, as the IRS does not apply it automatically. Most individuals need to 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 battles may have extended windows tied to open statutes.
Uncertainties from ongoing litigation make protective claims crucial. These filings preserve rights without precise calculations, as outlined in the IRS Internal Revenue Manual. Taxpayers should label the form clearly, such as “Protective Refund Claim Pursuant to Kwong,” and detail affected years. The IRS typically suspends these until courts clarify the law, then allows perfected submissions.
- Identify penalties or interest from January 20, 2020, to July 10, 2023.
- Gather transcripts to pinpoint assessments.
- Mail Form 843 via certified mail for proof, since electronic filing remains unavailable.
- Consult professionals for complex situations.
Paper Filing Hurdles and Calls for IRS Action
Paper-only submissions for Form 843 pose logistical barriers, slowing processes and risking lost mail without tracking. Certified mailing offers evidence of timeliness, yet burdens taxpayers with extra effort. At scale, millions of claims could overwhelm IRS operations, fostering delays and inconsistencies.
Advocates urge the IRS to publicize the issue, honoring Taxpayer Bill of Rights principles like being informed and paying no more than owed. Proposed steps include a six-month claim extension under IRC Section 6081, systemic abatements for equity, and an electronic portal for submissions. Without intervention, advised taxpayers may gain advantages over others, exacerbating inequities in tax administration.
As litigation unfolds, the core promise of disaster relief – support during crises – hangs in balance for ordinary Americans. Proactive claims by July 10, 2026, offer the surest safeguard, but broader IRS or congressional measures could ensure fairness reaches everyone affected. For many, these refunds represent not just dollars, but a measure of justice from an extraordinary time.