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A COVID-era tax penalty and interest refund owed to tens of millions of Americans could help them put extra cash in their pocket, but the deadline to file a claim is running out. The IRS won't issue those refunds automatically, meaning if taxpayers miss the July 10, 2026 deadline, they could permanently miss out on the money that they're owed.
Here's what to know about the refund, whether you might be eligible, and how to file a claim before time runs out.
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Where the refund opportunity comes from
The refund opportunity stems from a November 2025 federal court ruling in Kwong v. United States. The ruling found that, because of a tax code provision governing disaster-related filing and payment deadline postponements, tax filing and payment deadlines should have been postponed from January 20, 2020 through July 10, 2023 during the pandemic.
The court found that the IRS should not have assessed late filing or payment penalties during that period, and that interest shouldn't have been charged on the amounts due.
What the court finding means for taxpayers
According to the court's findings, taxpayers who were assessed certain amounts during that 3.5-year COVID period may be owed a tax refund or abatement.
Those refunds might include expenses like penalties you were assessed for failing to timely file your return, pay your taxes, or make estimated tax payments. Any interest that started accruing earlier than it should have might also be refunded, and you might also be owed any interest you overpaid for the 2020 through 2023 period. The exact amount of your refund would depend on which qualifying expenses or penalties you paid.
Who may qualify for a COVID tax refund
The IRS assessed penalties or interest for late filings or late payments from 2020 to 2023, meaning tens of millions of taxpayers might be affected. Those taxpayers could include individuals, small businesses, large corporations, estates, and trusts.
Taxpayers who filed late international information returns may also be affected by the ruling. Even when no tax is due, taxpayers may face significant penalties if international information returns are filed late.
The taxpayers affected don't represent one specialized group, and they range in income. Many affected taxpayers may have low or moderate incomes, which means they're less likely to have professional representation and may be at a greater risk of missing out on the option to claim a refund.
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Are the tax refunds guaranteed?
The tax refunds are not guaranteed at this time. During the court proceedings, the government argued for a more narrow interpretation of the tax code provision, disagreeing that filing and payment obligations should have been suspended for the full 3.5 years. The Department of Justice may appeal the court's decision.
However, if the court's decision holds up, affected taxpayers could be owed refunds. Filing a protective claim by the deadline preserves a taxpayer's right to a refund if the court ultimately rules that the IRS must provide refunds.
The claim deadline
The IRS generally doesn't issue refunds, even if they're owed, unless a taxpayer files a claim, and most claims must be filed within three years from the date you filed your tax return, or two years from the date you paid your tax. That means that most protective claims for the COVID tax refund must be filed on or before July 10, 2026.
How to file a claim
Since the law is uncertain at this time, filing a protective claim helps preserve your right to a refund if the court rules that those refunds be issued. You need to file a Form 843, Claim for Refund and Request for Abatement. The National Taxpayer Advocate recommends writing "Protective Refund Claim Pursuant to Kwong Case" or a similar message on the top. Be sure to complete the form with as much detail as you're able to provide.
Form 843 cannot be submitted electronically and instead must be submitted by mail. Consider sending your claim by certified mail, so you can prove that you mailed it by the deadline in case it is lost.
How tax transcripts may help
If you can't recall if you were assessed tax penalties or interest during the relevant period, you may access your tax transcripts online through the IRS Individual Online Account.
Alternatively, you may request your transcripts by mail, but that process often takes five to 10 days, so there may not be adequate time left before the July 10 deadline.
Bottom line
The outcome of the COVID tax refund is still uncertain, but working quickly to file a claim helps preserve your right to a refund pending the final court decision. The issue is complex and evolving, so be sure to watch for news and updates.
If the IRS ultimately is required to issue refunds, taking the time to file a claim might pay off with an extra boost to your bank account.
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