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 last year reshaped how the IRS must handle penalties and interest tied to filings during the long COVID-19 disaster period. That three-and-a-half-year stretch, from January 2020 to mid-2023, caught many off guard with late fees they now might reclaim. With claims due by July 10, 2026, time presses for those affected to step forward and protect potential refunds.
The Kwong Ruling Reshapes Disaster Relief Rules
The U.S. Court of Federal Claims delivered a pivotal decision in November 2025 in Kwong v. United States. The court examined Internal Revenue Code section 7508A(d), which automatically postpones tax filing and payment deadlines during a federal disaster declaration plus 60 days afterward. For COVID-19, the disaster ran from January 20, 2020, to May 11, 2023, pushing the relief window to July 10, 2023.
Judges ruled that deadlines stood suspended throughout this entire span, meaning returns or payments due within it arrived on time. Penalties for late actions and related interest should not have applied, according to this interpretation. The IRS had read the law more restrictively, but the decision emphasized the statute’s plain language extending relief from the disaster’s start through the full 60-day tail. An appeal seems likely, leaving the final word years away.
Who Stands to Benefit and What Amounts Are Involved
Tens of millions across income levels and taxpayer types could qualify. Individuals, small businesses, corporations, estates, and trusts with income, employment, estate, gift, excise taxes – or even late international information returns – face potential relief. Low- and moderate-income filers, often without advisors, hold much of the exposure yet risk missing out most.
Refunds or abatements target failure-to-file, failure-to-pay, and estimated payment penalties assessed in that window. Interest charges that kicked in too soon, or overpayment interest from 2020 to 2023, also come into play. Even pre-disaster delinquencies might see pauses on accruals, though regulations push back and courts have yet to weigh in fully. These sums, sometimes substantial amid financial strains, offer real relief if claimed properly.
Filing Claims: Steps, Forms, and Looming Hurdles
Relief demands action – most must submit a claim within three years of filing a return or two years of payment, capping at July 10, 2026, for many. Form 843 serves for refunds and abatements of assessed but unpaid amounts. Those in audits, appeals, or court might gain extra leeway through open statutes.
Paper submission stands as the biggest snag; electronic filing remains unavailable. Certified mail provides proof against losses in IRS processing backlogs. If millions respond, delays could mount, straining both sides. Taxpayers in ongoing disputes should weave this issue into settlements or strategies right away.
Protective Claims Offer a Safety Net in Legal Limbo
Uncertainty demands protective claims to lock in rights while courts deliberate. These filings need not pin down exact dollars but must flag the Kwong contingencies, target specific years, and signal the claim’s nature clearly. The IRS manual endorses them, holding such submissions in abeyance until resolution, then allowing perfected amounts.
Mark Form 843 boldly as a “Protective Refund Claim Pursuant to Kwong” atop the page, with as much detail as possible. This preserves deadlines even if final rulings lag past standard limits. Abatements for unpaid penalties and interest qualify too. Practitioners stress their value for all potentially eligible parties.
Push for Broader IRS and Policy Fixes
Fairness hangs in the balance without intervention, as advised taxpayers claim refunds while others forfeit unknowingly. The Taxpayer Bill of Rights underscores duties to inform, ensure correct payments, hear challenges, and foster equity. IRS steps could level the field.
- Publicize the issue widely, regardless of stance on Kwong, to alert all possibly due refunds or abatements.
- Extend the claim window six months via IRC section 6081 for learning and filing time.
- Deliver systemic relief to eligible filers, bypassing individual claims for uniform treatment.
- Launch an electronic portal for Kwong claims with instant receipts, easing paper burdens.
Congress, media, and professionals hold roles too in spreading word to avert unequal outcomes. COVID’s unprecedented length blindsided even experts on postponement scopes. Treasury, IRS, and lawmakers now hold chances to deliver the relief Congress intended – clarity, access, and justice for every affected taxpayer.