Millions of taxpayers may still be owed money from the pandemic era, and the clock is already running. The National Taxpayer Advocate says some Americans can still seek an irs pandemic penalty refund tied to a court ruling that reworked how tax deadlines were supposed to have been paused during COVID-19.
The potential refunds stem from Kwong vs. United States, a case that interpreted Section 7508A(d) to mean applicable tax deadlines should have been postponed for the disaster period plus 60 days. Under that reading, the COVID-19 pandemic period from January 20, 2020, through March 11, 2023, would fall under the rule, and the new deadline for tax years 2019, 2020, 2021 and 2022 filings would have been July 10, 2023.
That matters because the claim is not limited to one type of taxpayer or one kind of tax. The National Taxpayer Advocate said many of the affected taxpayers have low or moderate incomes, and that the issue reaches individuals, small businesses, large corporations, estates and trusts. It can touch income, employment, estate, gift and excise taxes, and it may also affect people who filed late international information returns.
“As a result, they face a greater risk of missing the opportunity to claim refunds to which they may be entitled,” the National Taxpayer Advocate said.
The same office warned that taxpayers should not assume the IRS will automatically sort it out. The IRS has disagreed with the ruling, and the Department of Justice is likely to appeal, which means the legal fight could drag on for years. The National Taxpayer Advocate said it may take several years before the courts settle the question, even though taxpayers may already be entitled to a refund or abatement of certain amounts assessed during the COVID period under the Kwong decision.
There is also a deadline built into the claim process. Most taxpayers need to act by July 10, 2026, to request the potential refunds. To see whether a penalty or interest was assessed during the filing pause, taxpayers can check their IRS tax transcript through an Individual Online Account or request it by mail. Tax account transcripts are also available, and the IRS said it does not automatically issue refunds or abate taxes that were assessed but not yet paid unless a taxpayer files a claim.
That filing requirement can be decisive. Taxpayers generally must file within three years from the date they filed their return or two years from the date they paid their tax, which means some people will lose the chance to recover money even if the court ruling ultimately stands. The practical result is that the people most likely to miss out are often the ones the Taxpayer Advocate said are already the most exposed.
For taxpayers who think penalties or interest were charged during the COVID filing pause, the issue is not waiting on Washington to settle itself. The claim window is open now, and for many of them, the last safe date is July 10, 2026.
