Millions of taxpayers may still qualify for refunds or penalty relief after a federal court recently found the IRS wrongly charged certain pandemic-era penalties and interest. The ruling could reopen claims tied to assessments made from Jan. 20, 2020, through July 10, 2023 — but the decision is not final and action is required to preserve rights.
What the court said and why it matters now
The decision in Kwong v. United States interprets a tax-code provision that delays filing and payment deadlines during declared disasters. Applied to the Covid-19 federal disaster period (through May 11, 2023, plus an extra 60 days), the ruling concluded the IRS should not have imposed certain penalties and interest for the specified window.
If the ruling stands, affected taxpayers could receive refunds for penalties already paid, or have outstanding penalty balances abated. But the government may appeal, so taxpayers who believe they’re eligible must act quickly to protect their claims.
Who could be affected
Relief would not be limited to a narrow slice of taxpayers. According to the Taxpayer Advocate Service, those who might benefit span individuals, small businesses, large corporations, estates and trusts.
To give a sense of scale, IRS data from fiscal 2023 show more than 14.2 million individual estimated tax penalties and about 18.6 million failure-to-pay penalties were assessed, though some penalties were already abated.
How penalties were calculated
| Penalty | Monthly rate | Maximum |
|---|---|---|
| Failure-to-file | 5% of unpaid tax per month | Up to 25% |
| Failure-to-pay | 0.5% of balance per month | Up to 25% |
Quick steps to check and protect your claim
- Review your IRS online account or tax transcripts to see whether penalties or interest were charged between Jan. 20, 2020 and July 10, 2023.
- If you paid penalties, file a refund claim using Form 843. The form must be mailed; it cannot be filed electronically.
- If penalties remain unpaid, submit an abatement request (also typically via Form 843).
- Consider filing a protective claim to preserve refund rights while the legal situation is unresolved.
- Send mailed claims by certified mail or another trackable method to document that you met the deadline.
- Consult a tax professional to confirm eligibility and prepare supporting documentation.
The general statute of limitations for refund claims gives most taxpayers three years from the filing deadline to seek unpaid refunds. That timeline brings many potential claims to a hard cutoff on July 10, 2026, so timing is critical.
Practical considerations
Filing the right paperwork is only part of the process. Keep organized records showing payments and communications with the IRS; the agency will require documentation to process refunds or abatements.
Tax professionals warn that the outcome remains uncertain because the ruling could be reversed on appeal. Even so, the recommendation from the Taxpayer Advocate Service is clear: taxpayers should move now to preserve any potential claims.
For anyone unsure whether they were charged eligible penalties or how to proceed, start by checking your IRS transcript and seeking guidance from a qualified tax adviser. Acting before the deadline preserves options while the courts and the IRS sort out the legal ramifications.
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