IRS COVID Penalty Refunds Put Millions on the Clock
Taxpayers may be able to recover pandemic-era penalties and interest, but only if they file a protective claim before the July 10 deadline.
AP News reported that some taxpayers penalized by the IRS during COVID may be owed refunds (
AP News). The leverage now sits with the filing deadline, not the agency: a November ruling in Kwong v. United States gave taxpayers a legal path to seek back penalties and interest assessed during the pandemic period, but the IRS is not sending automatic checks and taxpayers must preserve their claims by July 10, 2026 (
USA Today).
Why this matters
This is less a refund story than an administrative standoff. The court’s logic, as described by USA Today, is that the COVID-19 public health emergency triggered Section 7508A(d), which postponed certain tax deadlines through July 10, 2023. If that reading holds, penalties for late filing, late payment, estimated tax shortfalls, and some interest charges during the affected window may have been improper.
That creates a potentially large liability for Treasury and a paperwork problem for the IRS. The National Taxpayer Advocate has warned that the relief is not automatic and that lower- and moderate-income taxpayers are especially likely to miss out if they do nothing, while tax professionals say the pool includes individuals, small businesses, estates, trusts, and even larger entities (
Montgomery Advertiser; USA Today). For 
United States taxpayers, this is a classic case of a court decision turning into a mass-administrative claim problem.
Who can actually get paid
The claim is narrow in procedure even if broad in reach. Taxpayers need to review IRS account transcripts for 2019-2022 returns to see whether penalties or interest were assessed during the COVID period, then file IRS Form 843 as a protective claim (USA Today; Montgomery Advertiser). That means the beneficiary is not just whoever was “overcharged,” but whoever can prove it in time.
The loser is the taxpayer who assumes the IRS will fix this later. The agency disagrees with the court’s interpretation and is expected to keep fighting the issue, which means many eligible taxpayers could be trapped between a legal theory that may eventually win and a filing deadline that is real today (USA Today).
What to watch next
The next decision point is blunt: whether taxpayers flood the IRS with paper Form 843 claims before July 10, 2026. After that, the legal fight can continue, but late filers may have no practical claim left to preserve (USA Today). Watch for two things: whether the IRS expands electronic filing, as the Taxpayer Advocate wants, and whether the agency formally escalates its appeal. If it does neither quickly, the backlog will become the story.
