The National Taxpayer Advocate warns tens of millions may be owed refunds for COVID-era penalties
Tens of millions of Americans may be owed refunds or reductions of penalties and interest by the IRS — money tied to the COVID-19 federal disaster period that most taxpayers have no idea they can claim. The catch is that most will need to act by July 10, 2026, or the opportunity closes permanently.
The warning comes from National Taxpayer Advocate Erin M. Collins, who published a detailed blog post describing what she calls a major refund opportunity driven by recent court decisions. Collins serves with the Taxpayer Advocate Service, an independent organization within the IRS that works on behalf of taxpayers navigating the system.
The court ruling that opened the door
At the center of the issue is a ruling in the Kwong case, decided by Judge Molly Silfen of the U.S. Court of Federal Claims in November 2025. The court found that the tax code’s automatic deadline postponement provisions — originally designed for natural disasters — applied to the entire COVID-19 federal disaster period, which ran from January 20, 2020 through May 11, 2023, plus an additional 60 days.
The practical consequence is significant: the IRS should not have assessed penalties for late filing or payment during that period, meaning taxpayers who were hit with those penalties, or who paid interest that began accruing earlier than it should have, may be entitled to get that money back.
Who may qualify
The affected population is broad and not limited to a small or specialized group — it includes individuals, small businesses, large corporations, estates, and trusts. Taxpayers may qualify if they were assessed penalties for failing to file timely returns, failure to pay taxes, or failure to make estimated tax payments, as well as interest that began accruing earlier than it should have, or not at all, and overpayment interest for the 2020-2023 disaster period.
In fiscal year 2022 alone, the IRS levied more than 12 million estimated-tax penalties and upward of 16 million failure-to-pay penalties, totaling more than $12 billion — though some were later reduced or removed. Not all of those penalties fall within the Kwong ruling’s scope, but the potential pool of affected taxpayers is nonetheless enormous.
What to do before July 10
This relief will not happen automatically. To protect their rights, most taxpayers must file a claim for refund — generally by July 10, 2026 — using Form 843, Claim for Refund and Request for Abatement. The filing deadline is generally within three years from the date a return was filed, or two years from the date the tax was paid.
Form 843 must currently be submitted by paper mail, as there is no electronic filing option, and Collins recommends sending it via certified mail to establish a clear paper trail. The potential flood of paper submissions is itself a concern, as it could create processing delays and uneven treatment at an already stretched agency.
For taxpayers who want to preserve their rights while the legal outcome remains uncertain, a protective claim is also an option — it allows a taxpayer to protect the right to a refund without requiring a precise dollar amount, and must also generally be filed by July 10, 2026. Protective claims prevent the period of limitations from expiring while waiting for a final resolution of the Kwong litigation. Taxpayer Advocate ServiceTaxpayer Advocate Service
The Department of Justice is expected to appeal the Kwong decision, meaning the law in this area remains unsettled. Collins has expressed concern that the complexity of the situation could produce unequal outcomes — with taxpayers who have professional representation recovering refunds while those without guidance miss the window entirely. Anyone who believes they may be affected is encouraged to speak with a tax professional as soon as possible.
Source: The Hill / Nexstar, published May 3, 2026