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Millions of Americans could be entitled to money from the IRS and not even know it. The catch is that the opportunity may disappear if they fail to act before a critical deadline.
If you're hoping to keep more cash in your wallet, a recent court ruling and warnings from the IRS Taxpayer Advocate Service have put a spotlight on a potentially significant refund opportunity. The issue affects far more than a small group of taxpayers, and the clock is already ticking toward a July 10, 2026, deadline.
Before that date arrives, there are several important details worth understanding to see if you qualify.
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A court ruling challenged pandemic-era IRS penalties
The issue stems from a November 2025 decision in Kwong v. United States by the U.S. Court of Federal Claims.
The court concluded that the COVID-era disaster relief law postponed certain filing and payment deadlines during the federal disaster period starting from January 20, 2020. In its ruling, the court found that the automatic extension ran through the end of the disaster period and 60 additional days, which pushed the relevant date to July 10, 2023.
The ruling specifically involved penalties and timing rules connected to affected tax obligations. However, the broader implications could extend well beyond the original plaintiff.
The IRS Taxpayer Advocate Service says the issue is widespread
According to the IRS Taxpayer Advocate Service, the impact is not limited to a handful of taxpayers.
The office has warned that individuals, small businesses, large corporations, estates, and trusts may all have been affected if they were assessed penalties or interest during the pandemic disaster relief period. Tens of millions of taxpayers may be entitled to refunds or abatements if the court's reasoning ultimately holds up. That makes this a potentially massive issue.
Many taxpayers who paid penalties years ago may have no idea they could now have grounds to request a refund.
Relief is not automatic
One of the most important details is also the easiest to miss. The IRS is not automatically sending refunds to taxpayers who may have been affected by the ruling. Instead, taxpayers will need to file a refund claim or protective claim by July 10, 2026, to preserve their rights while the legal issue continues to play out.
That means waiting for the IRS to contact you may not be enough. If no action is taken before the applicable deadline, potential refund rights could be lost even if courts ultimately uphold the taxpayers' position.
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July 10 is the deadline that many taxpayers need to know
The IRS Taxpayer Advocate Service has specifically highlighted July 10, 2026, as a critical date.
Taxpayers who may have been affected are being encouraged to file protective refund claims on or before that deadline. A protective claim allows taxpayers to preserve their refund rights while legal questions remain unresolved.
The deadline matters because refund statutes of limitation continue to run regardless of ongoing litigation. Once those deadlines expire, obtaining relief could become significantly more difficult or impossible.
Form 843 may help preserve refund rights
Many affected taxpayers are being advised to consider filing IRS Form 843, Claim for Refund and Request for Abatement.
The form is used to ask the IRS for a refund or abatement of certain taxes, penalties, fees, and interest. For Kwong-related claims, taxpayers generally should write language such as "Protective Refund Claim Pursuant to Kwong Case" across the top and provide as much detail as possible.
Because each taxpayer's circumstances differ, professional guidance can be especially valuable. The rules surrounding disaster relief, penalty assessments, and refund claims can become complicated quickly.
More than 1.3 million taxpayers were owed 2022 refunds
The pandemic penalty issue was not the only IRS deadline this year.
More than 1.3 million people still had unclaimed refunds from tax year 2022. The agency estimated those refunds totaled about $1.2 billion, with a median refund of $686. Taxpayers generally have three years to claim a refund before the money becomes property of the U.S. Treasury. The deadline for 2022 was April 15, 2026, and has now passed.
For some households, that represents money they could have recovered with a simple filing. But those opportunities disappear once a deadline passes.
Bottom line
A federal court ruling and warnings from the IRS Taxpayer Advocate Service suggest that millions of taxpayers may have grounds to seek refunds or penalty relief tied to pandemic-era IRS assessments. While the final outcome remains uncertain, waiting until the last minute could put potential claims at risk.
If you paid IRS penalties or related interest on returns affected by the pandemic disaster period, now is the time to speak with a qualified tax professional. Taking action before the deadline expires could help lower your financial stress and ensure you don't leave money on the table.
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