A recent federal court decision could have major implications for taxpayers who were assessed IRS penalties and interest during the COVID-19 pandemic.

In Kwong v. United States, the U.S. Court of Federal Claims ruled that under the version of Internal Revenue Code Section 7508A in effect when COVID-19 was declared a federal disaster, certain tax filing and payment deadlines were automatically postponed for the duration of the disaster period, plus an additional 60 days. This meant that the postponement period ran from January 20, 2020, through July 20, 2023.

If the decision is upheld, taxpayers who paid IRS penalties and interest during the COVID-19 disaster period may be eligible for refunds or abatements. However, refunds and abatements will not be processed and delivered automatically. Taxpayers must take steps to secure compensation and must do so by the IRS deadline: July 10, 2026.

The Court’s Decision

The court’s ruling centered on federal statute 26 U.S.C. § 7508A, which gives the IRS authority to postpone tax deadlines for taxpayers affected by federally declared disasters. When Congress enacted COVID-19 emergency relief legislation, it used this statute to extend a wide range of tax deadlines, including deadlines for filing refund claims and pursuing those claims in court.

The court found that under the 2019 version of § 7508A (the version that applied when the COVID-19 disaster was declared), the postponement period ran from the beginning of the disaster declaration through the end of the declared emergency period.

Who May be Eligible

According to the National Taxpayer Advocate, millions of taxpayers may be eligible for significant tax refunds based on the Kwong decision. Taxpayers who may be eligible for a tax refund or abatement include those that:

• Had IRS refund claims or abatement requests denied between January 20, 2020, and July 20, 2023, and were told they missed a filing deadline;
• Paid IRS tax penalties — including failure-to-pay penalties, estimated tax penalties, or delinquency penalties — for tax years where COVID-19 disaster relief should have applied; or
• Had refund claims rejected as untimely due to the standard statute of limitations, without any consideration of the COVID-19 deadline extension.

For small business owners who faced compounding penalties during the COVID-19 pandemic, financial relief could be substantial—thousands or tens of thousands of dollars per taxpayer in some cases.

To determine whether you are eligible for a refund or abatement, start by reviewing your IRS tax account transcripts. The fastest way to access your IRS transcripts is through your Individual Online Account or Business Tax Account. Taxpayers can immediately view, download, and print IRS tax transcripts from their IRS individual or business account. IRS transcripts can also be requested by phone at 800-908-9946 or through the mail by submitting IRS Form 4506-T. For additional information on how to request and access IRS tax transcripts visit www.irs.gov/individuals/get-transcript.

How to File a Claim

Once you have determined that you may qualify for refund or abatement, file an IRS refund claim immediately by filing either a formal or protective claim.

Formal Claim for Refund

If you are certain about the dollar amount owed to you, file IRS Form 843, Claim for Refund and Request for Abatement, and submit it to the IRS service center where your original return was filed.

Protective Claim for Refund

If you are uncertain about the exact dollar amount you are owed, you can file a protective claim by completing IRS Form 843, clearly labeling it as a protective claim, and referencing the Kwong v. United States and 26 U.S.C. § 7508A as the basis for the extended deadline.

A protective claim preserves your right to a refund without requiring you to gather and submit all the details pertaining to the claim. It is used to uphold taxpayer rights while the law remains unsettled or the exact amount owed is yet to be calculated.

Because the decision in the Kwong case is not yet final, taxpayers may opt for filing a protective claim as opposed to waiting for a definitive ruling and missing the July 10 deadline.

Further guidance on filing a claim for refund with the IRS can be found on the IRS website or on the National Taxpayer Advocate Blog.

Act Now

Small business owners were among the hardest hit by the economic disruptions of the COVID-19 pandemic. They were also among the most likely to have faced IRS penalties during that period. With everything that small business owners faced, accurately estimating and paying taxes was understandably difficult. Still, the IRS continued issuing penalties even as business owners faced unprecedented challenges, despite a federal statute barring those penalties.

With the July 10 deadline approaching, taxpayers should act immediately to see if they are eligible for a refund or abatement.

If you have any questions about tax refunds or abatement, contact the NFIB Legal Center at info@nfib.org.

Updated May 28, 2026