A recent federal court ruling has opened a narrow window for millions of Americans to claw back money from the IRS. Due to a legal interpretation regarding the pandemic-era disaster period, taxpayers who were hit with late fees, interest, or failure-to-pay penalties between January 20, 2020, and July 10, 2023, may now be eligible for a full refund or a waiver of those costs.
The shift comes following the court case Kwong v. United States. The presiding judge determined that the IRS should not have assessed certain penalties and interest during the federally declared COVID-19 disaster period, which technically extended 60 days past May 11, 2023. This ruling is based on tax code provisions that dictate how filing and payment deadlines are handled during official disasters.
While the government could still appeal the decision, the clock is ticking for taxpayers to protect their right to a refund. Because of the three-year statute of limitations on most tax claims, the deadline to file for this specific relief is July 10, 2026.
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National Taxpayer Advocate Erin Collins, who leads an independent organization within the IRS, noted that this is not a niche issue.
“This issue is widespread and not limited to a small or specialized group of taxpayers,” Collins stated. “Impacted taxpayers represent a broad cross-section of the public, including individuals, small businesses, large corporations, estates and trusts.”
The scale of the potential payout is significant. In the 2023 fiscal year alone, the IRS issued over 14.2 million penalties for underpaying estimated taxes and 18.6 million penalties for failing to pay on time. For many, these penalties can reach up to 25% of the total tax owed, not including accrued interest.
Unlike some pandemic relief programs, this money will not be sent out automatically. Taxpayers must proactively file a claim to see a dime.
To check for eligibility, taxpayers can review their IRS online account transcripts for penalties or interest charged during the 2020-2023 window. If a penalty was assessed, the standard procedure involves filing Form 843. This form cannot be submitted online; it must be printed and mailed. Experts recommend using certified mail to ensure there is a paper trail proving the claim was sent before the July deadline.
For those with unpaid balances, the process involves asking for an “abatement,” which essentially wipes the penalty off the books. If the penalty has already been paid, the filer asks for a direct refund.
Collins suggests that taxpayers consider filing a “protective claim” to lock in their spot while the legal case finishes working its way through the system. She also advises filers to consult with a professional and keep detailed records of all IRS correspondence from the pandemic years.
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