Protect Your Potential COVID-19 Disaster Relief Refunds By Filing Formal or Protective Claims for Refund (Part III) – Image for illustrative purposes only (Image credits: Unsplash)
Many taxpayers who paid penalties and interest during the extended COVID-19 federal disaster period now have a limited window to seek recovery, yet the process requires deliberate action rather than waiting for automatic relief. Recent court reasoning in Kwong v. United States indicates that certain assessments tied to returns and payments due between January 2020 and May 2023 may have been improper, potentially affecting millions of individuals. Without filing a timely claim, those amounts could remain permanently out of reach, even if later legal developments support the taxpayer’s position. One concrete example involves a person who filed a 2021 income tax return on August 30, 2022, and paid penalties assessed for a supposed late filing; under the Kwong analysis, the actual due date would shift to July 10, 2023, creating a three-year refund window that closes on July 10, 2026.
Why the July 10, 2026 Deadline Matters
The IRS can credit or refund overpayments of tax, penalties, or interest only when a claim arrives within strict time limits. In most cases, that means filing before the later of three years from the return’s due date or two years from the date of payment. The Kwong reasoning treats the COVID-19 disaster period – January 20, 2020, through May 11, 2023, plus 60 days – as postponing many filing and payment deadlines until after July 10, 2023. For returns originally due in 2019 through 2022, this extension generally moves the three-year refund deadline to July 10, 2026. If payment of the penalties or interest occurred later, the two-year rule may provide additional time, but taxpayers must still verify their specific dates against their account transcripts.
Formal Claims Versus Protective Claims
Taxpayers can choose between a formal refund claim and a protective refund claim depending on how certain they are about the amount involved. A formal claim works when the exact figure can be calculated at the time of filing and seeks an immediate return of money already paid. A protective claim, by contrast, preserves the right to a refund while the final amount or legal entitlement remains unclear because it hinges on ongoing litigation or future guidance. Both types must be submitted in writing and on time; a missed deadline cannot be fixed later even if the underlying issue is eventually resolved in the taxpayer’s favor. Formal claims also create a six-month clock after which a taxpayer may generally sue in federal court if the IRS has not acted, whereas protective claims are typically held until the legal question is settled.
How to File Using Form 843
For penalties and interest tied to the Kwong issue without changes to the underlying tax liability, most individuals use Form 843, Claim for Refund and Request for Abatement. The form requires the taxpayer’s identifying information, the specific tax years, and a clear description of the amounts sought. When the penalties or interest have already been paid, the request is treated as a refund claim; when they remain unpaid, it functions as an abatement request. Protective claims follow the same form but include language such as “Protective Refund Claim Pursuant to Kwong Case” at the top and focus on identifying the legal issue rather than calculating a precise dollar amount. Each tax period generally needs its own form, and the completed document should be mailed to the IRS service center that handles the taxpayer’s current-year Form 1040.
Common Mistakes That Can Block Recovery
Several frequent errors can cause otherwise valid claims to be rejected or delayed. Missing the July 10, 2026, deadline is the most irreversible, as the three-year or two-year rules are strictly enforced. Vague language that simply reserves rights without naming the Kwong issue, the affected years, or the penalties involved often fails to meet IRS requirements. Taxpayers also risk problems by sending the form to the wrong address or combining multiple unrelated years on a single Form 843. Keeping proof of mailing through certified mail with return receipt and retaining complete copies of everything submitted helps avoid disputes over timeliness. Acting before the deadline keeps options open while the courts continue to examine the scope of the Kwong decision. Individuals who believe they may qualify should review their transcripts and consider consulting a qualified tax professional to determine the best approach for their circumstances.