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Tens of millions of taxpayers in the United States may be eligible for refunds or reductions of penalties and interest that the IRS charged them during the COVID-19 pandemic, according to an urgent alert from the National Taxpayer Advocate published in April of this year.
The opportunity arises from a judicial ruling in November 2025 by the U.S. Court of Federal Claims, known as Kwong v. United States, which reinterpreted a provision of the tax code regarding deadline extensions during federal disaster declarations.
The ruling that opens the door
The court determined that Section 7508A(d) of the Internal Revenue Code automatically suspended all deadlines for filing and paying taxes during the COVID-19 disaster period, which was in effect from January 20, 2020, to May 11, 2023.
With the additional 60 days provided by the law, the tax protection period is extended until July 10, 2023.
The ruling itself states: "The literal meaning of that law is that the automatic extension lasts from the beginning of the disaster declaration until the end of the declared period and up to 60 days afterwards."
As a result, according to the Taxpayer Advocate, "the IRS should not have applied penalties for late filing or payment during that three-and-a-half year period, nor should it have charged interest on those amounts."
Who can claim?
The scope is broad: individuals, small businesses, large corporations, estates, and trusts. The ruling affects obligations related to income tax, employment tax, estate tax, gift tax, and excise taxes. It may also benefit those who filed international information returns late, facing significant penalties even without any taxes owed.
Eligible amounts include penalties for late filing or payment, penalties for insufficient estimated payments, and interest that began to accrue prematurely.
We must act before July 10th
The main warning from the National Taxpayer Advocate, Erin M. Collins, is that the benefit will not come automatically.
Most taxpayers must submit a formal request before July 10, 2026, a deadline that corresponds to three years from the expiration of the extended period.
The instrument is IRS Form 843 (Claim for Refund and Request for Abatement). Experts recommend including the phrase "Protective Refund Claim Pursuant to Kwong Case" to preserve rights while the litigation continues.
The first step is to review the tax account transcript on IRS.gov to identify potentially refundable penalties. Knowing the changes in taxes in the U.S. for 2026 also helps to understand the current tax landscape.
The most vulnerable: low-income taxpayers
Collins warned that low- or moderate-income taxpayers are at a greater risk of missing out on this opportunity due to a lack of professional representation.
"Without the intervention of the IRS or Congress, the results could unfairly benefit the 'well-advised' to the detriment of the 'uninformed,'" he noted.
This concern is especially relevant for the immigrant community, which already faces additional fears when filing taxes in the current context.
The government is preparing an appeal
The IRS and the Department of Justice disagree with the court's interpretation and are expected to appeal the decision.
Experts estimate that the case could take several years to resolve, but the Defender recommends taking action now to avoid losing the right due to expiration.
Since the beginning of the tax season in the U.S., this ruling has garnered increasing attention among tax advisors and taxpayers.
"For taxpayers facing financial pressures, these amounts can make a real difference. However, most must take action before July 10, 2026 to request their potential refunds," Collins concluded.
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