Tens of millions of taxpayers may be able to get refunds or abatements of penalties and interest the Internal Revenue Service assessed during the nearly 3.5-year COVID-19 federal disaster period, but they will not get that relief automatically. Most taxpayers must file a claim for refund by July 10, 2026, if they want the money back.
The issue stems from recent court decisions, especially Kwong v. United States, 179 Fed. Cl. 382, decided in November 2025. Under the court’s reasoning, a federal disaster declaration that was in effect from January 20, 2020, through May 11, 2023, plus 60 additional days for tax purposes, meant filing and payment deadlines were postponed through July 10, 2023. In that view, returns and payments due anytime in that window were not late until after July 10, 2023.
That matters because, by the court’s logic, the IRS should not have assessed late-filing or late-payment penalties during that period, and it should not have charged interest on those amounts either. The opinion said, “The plain meaning of that statute is that the automatic extension runs from the beginning of the disaster declaration, through the end of the declared disaster period, and until 60 days after the end of the declared disaster period.”
The government’s pleadings took a narrower view and argued that the postponement statute did not suspend filing and payment obligations for the full 3.5 years. The Taxpayer Advocate Service says the dispute concerns IRS-assessed penalties and interest during the COVID-19 federal disaster period, and that tens of millions of taxpayers were assessed penalties. The relief, in other words, turns on how courts interpret IRC § 7508A(d) as it existed when the disaster was declared.
The practical snag is that even a favorable ruling does not resolve the issue for everyone at once. The Department of Justice is expected to appeal the Kwong decision, and it may take several years before the courts finally settle how far the law reaches. For now, taxpayers who think they were charged penalties or interest in that period will need to act on their own before the July 10, 2026 deadline.