COVID-Era IRS Penalties: A July 10 Deadline
The IRS assessed penalties and interest on millions of filings and payments that came due during the pandemic. A recent federal court decision has raised a question that could matter for anyone who paid them: were some of those charges applied to deadlines that had, in fact, been postponed?
The answer is not settled. But the window to preserve a claim while the courts work it out is narrow, and for most affected taxpayers it closes on July 10, 2026.
At Avion Wealth, we see items like this surface most often not because a client missed them, but because they sit at the seam between the financial plan and the tax return, where coordination between advisors matters most. This is one worth understanding before the date passes.
What the Court Decided
In Kwong v. United States, decided by the U.S. Court of Federal Claims on November 25, 2025, the court interpreted Internal Revenue Code Section 7508A(d), the provision that postpones federal tax deadlines during a federally declared disaster. The court held that the COVID-19 disaster declaration automatically postponed federal filing and payment deadlines for the full length of the declared disaster period, which ran from January 20, 2020 through July 10, 2023.
The implication is significant. If those deadlines were postponed, then penalties and interest the IRS charged as though the filings and payments were late during that window may have been applied when they should not have been.
The decision builds on an earlier Tax Court case, Abdo v. Commissioner, which reached a similar conclusion about the same statute.
Why the Relief Is Not Automatic
Two things are true at once, and they sit in tension.
First, the IRS disagrees with the decision and has appealed it. The matter is not final and could be affirmed, narrowed, or reversed by a higher court. The IRS is not currently issuing these refunds.
Second, the statute of limitations does not pause while the appeal runs. For most affected taxpayers, the deadline to file a claim is July 10, 2026, measured three years from the postponed deadline of July 10, 2023 under the general rule of IRC Section 6511. A taxpayer who waits for the case to be finally resolved will very likely find the filing window has already closed.
This is the situation a protective claim is built for. A protective claim is filed before the statute of limitations runs, while the underlying legal question is still open. The IRS typically holds it in suspense until the law is settled. If taxpayers ultimately prevail, the claim is already preserved. If the deadline passes without one, no refund is available regardless of how the law develops.
Charges That May Be in Scope
Depending on the specific facts, the charges potentially covered include:
- Failure-to-file penalties
- Failure-to-pay penalties
- Estimated tax penalties
- Underpayment and related interest that accrued during the disaster window
Eligibility is broad in principle. Because COVID-19 was a nationwide disaster declaration, the geographic requirement is met for essentially every U.S. taxpayer, and the potential population includes individuals, businesses, partnerships, S corporations, LLCs, trusts, estates, and nonprofits.
Breadth is not the same as certainty. Whether a claim is appropriate, and whether it is even still timely, depends on individual filing dates, payment dates, the type of claim, and prior IRS activity. Some situations may already fall outside the applicable window. Others may have a longer window if penalties or interest were paid later. This is fact-specific, and it deserves review rather than assumption.
How Claims Are Generally Filed
The mechanics below are provided for general understanding, not as filing instructions. The evaluation and preparation of any claim is properly handled by a qualified tax professional who can review your IRS account.
Claims are generally made on IRS Form 843, Claim for Refund and Request for Abatement, filed separately for each tax year at issue. The form and its official instructions are available directly from the IRS on its About Form 843 page, which also carries the IRS’s own guidance on claims citing Kwong. The current version is the December 2024 revision. The IRS has published guidance on how these claims should be identified so they are routed correctly:
- For paper filings, the IRS asks that “Kwong vs. United States” be written across the top of the form, with a statement on Line 8 noting that the filing is a protective claim under Treasury Regulation Section 301.6402-2(b)(1).
- As of July 2026, the IRS opened a narrow electronic option: individual taxpayers with an existing IRS Online Account may file a Kwong-related claim for fully paid penalties and interest through a tool on the IRS.gov mobile-friendly forms page. Business taxpayers, and anyone who prefers not to e-file, submit on paper.
- Supporting documentation, such as IRS account transcripts and copies of relevant notices, strengthens a claim, and keeping proof of timely filing is a common practice.
The strength of any claim turns on the paper trail: what was paid, when, and against which assessment. Pulling and reading account transcripts takes time, which is the practical reason the approaching deadline matters.
A Word of Caution
The National Taxpayer Advocate has flagged that this topic has drawn scams and aggressive marketing. The guidance is to be wary of anyone promising a guaranteed refund, charging excessive fees, pressuring quick action, or unable to explain the legal basis for a claim. Filing an improper claim can expose a taxpayer to audits, repayment obligations, and further penalties.
There are no guaranteed outcomes here. A claim preserves a position; it does not assure a refund. That distinction is the whole point of a protective filing, and it is the right frame for evaluating anyone’s advice on the subject, including where you choose to seek it.
Frequently Asked Questions
What is the deadline? For most affected taxpayers, July 10, 2026. It can vary based on your specific filing and payment dates and the type of claim, and some claims may already be time-barred.
Does this apply to state tax penalties? Not automatically. Kwong interprets federal tax law under IRC Section 7508A. State penalties and interest are governed by each state’s own rules and must be reviewed separately.
Does filing guarantee a refund? No. The decision is on appeal and the outcome is uncertain. A protective claim preserves the right to a refund if taxpayers ultimately prevail; it does not guarantee one. Not filing, however, generally forecloses any recovery.
Who might this affect? Individuals, businesses, trusts, estates, and nonprofits that paid federal late-filing penalties, late-payment penalties, estimated tax penalties, or related interest tied to deadlines falling between January 20, 2020 and July 10, 2023.
To your success,
The Avion Wealth Team
Sources
- National Taxpayer Advocate, “Act on or Before July 10, 2026, to Protect Potential COVID-19 Disaster Relief Refund Claims”
- National Taxpayer Advocate, “Tens of Millions of Taxpayers May Be Eligible for Significant Tax Refunds – If They Act by July 10 (Part I)”
- National Taxpayer Advocate, “Protect Your Potential COVID-19 Disaster Relief Refunds by Filing Formal or Protective Claims for Refund (Part III)”
- Kwong v. United States, 179 Fed. Cl. 382 (U.S. Court of Federal Claims, Nov. 25, 2025)
- IRS, “About Form 843, Claim for Refund and Request for Abatement” (including guidance on Kwong-related claims, updated July 1, 2026)