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Many Americans paid IRS penalties or interest during the pandemic without realizing those charges may not have been valid. A November 2025 federal court ruling could now open the door for refunds — potentially helping you put extra cash in your pocket at a time when every dollar counts.
The issue stems from how the IRS handled tax deadlines during the COVID-19 emergency, when widespread disruptions made it harder for individuals and businesses to meet filing and payment requirements.A recent court decision in Kwong v. United States found the agency may not have followed the law when applying penalties and interest during that period.
Because this opportunity is both legitimate and time-sensitive, it's worth understanding who qualifies and what steps to take before potential deadlines arrive.
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A court ruling could change how pandemic penalties were applied
A federal court recently ruled in Kwong v. United States that the IRS was required to extend tax deadlines for the full duration of the federally declared COVID-19 disaster period under IRS Section 7508A(d). That period ran from January 20, 2020, through May 11, 2023, plus an additional 60 days, effectively pushing deadlines to July 10, 2023, as outlined in federal law at 26 U.S. Code § 7508A.
Because the IRS did not fully apply that extended timeline, the court found that penalties and interest may have been improperly charged during those years. This ultimately means that the agency may have lacked the authority to impose certain charges within that window.
The ruling has already prompted high-profile refund claims — a lawsuit from Western Digital is seeking a refund of more than $20 million tied to interest.
Millions of taxpayers may qualify for a refund
Eligibility is broader than many people might expect, covering both individuals and businesses that paid IRS penalties or interest between January 20, 2020, and July 10, 2023. This includes common situations such as late payment penalties, underpayment interest, or other charges tied to delayed filings or failure-to-pay.
Even taxpayers who eventually paid their balances in full could still qualify if any portion of that payment included penalties or interest assessed during the affected period. That means retirees, small business owners, and self-employed workers could all be impacted depending on their filing history.
The deadline to act could be closer than it seems
Although the ruling creates a potential refund opportunity, the window to claim that money is limited by standard IRS rules. In most cases, taxpayers have three years from when a return was filed or two years from when the tax was paid — whichever is later — to request a credit or refund.
Because the extended pandemic deadline effectively ended on July 10, 2023, that puts a key cutoff around July 10, 2026, for many claims. Waiting too long could mean losing the ability to recover those funds entirely under statute-of-limitations rules. The IRS could appeal the ruling, which might delay outcomes or change how broadly refunds are issued, making early action a practical consideration.
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How to check your records and file a claim
The first step is confirming whether you paid penalties or interest during the eligible window. You can review your IRS tax transcripts online using the official get a transcript tool or request them by mail by calling 800-908-9946.
If you identify qualifying charges, you can file a refund request using IRS Form 843, which is designed for claiming refunds of penalties and interest. Because the rules and timing can be complex, working with a tax professional can help ensure your claim is accurate and supported with the right documentation.
Bottom line
A little-known court decision could allow millions of Americans to recover penalties and interest they paid during the pandemic — but the opportunity may not last forever. Reviewing your records now and understanding your eligibility could make a meaningful difference in your overall financial picture.
Even a modest refund could help lower your financial stress, especially if you're managing fixed income or rising expenses in retirement. Taking action early — and confirming your eligibility with a professional — can help you avoid missing a deadline that may not come around again.
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