Did the IRS Charge You Penalties or Interest During COVID? You May Be Owed a Refund.

A recent court ruling suggests that many tax deadlines were automatically extended during the COVID-19 pandemic — meaning penalties and interest the IRS collected during that time may never have been legally owed. Here’s what you need to know, and why you need to act before July 10, 2026.

What Happened?

In a case called Kwong v. United States, a federal court ruled that a tax law provision under 26 U.S.C. § 7508A(d) — combined with the COVID-19 disaster declarations — legally postponed most federal tax filing and payment deadlines from January 20, 2020 through July 10, 2023.

In plain terms: if this ruling holds up, tax returns and payments that were due during that window weren’t technically late until July 11, 2023. That means any penalties or interest the IRS charged for “late” filings or payments during those years may have been wrongly assessed.

The IRS disagrees and is expected to appeal the decision. But here’s the catch: if you want to recover money, you can’t wait to see how the appeal turns out.

Who Does This Affect?

You may be affected if you filed federal tax returns due between January 20, 2020 through July 10, 2023 and were charged any of the following:

• Late-filing or late-payment penalties: If the deadline was legally pushed to July 11, 2023, these charges may have been improper.
• Underpayment interest: Interest that started accruing before July 11, 2023 may not have been legally owed.
• Interest on refunds: If your returns are now considered timely, the IRS may owe you interest on overpayments it has been holding.
• Foreign information return penalties: These are tied to income tax deadlines and may be recoverable. Note: FBAR penalties are under a different law and are not affected.

This applies to individuals, businesses, and U.S. taxpayers living abroad who filed on extension or caught up on filings during this period.

The Deadline: July 10, 2026

The statute of limitations for most COVID-era claims expires on or around July 10, 2026. To protect your right to a refund while the legal question plays out in the courts, you need to file what’s called a protective refund claim using Form 843, Claim for Refund and Request for Abatement before that date.

Think of it like placing a hold on your seat. If the court ultimately rules in the taxpayers’ favor, a timely-filed claim means you’re in line to collect. Without one, you could lose your right to a refund entirely, even if you would have qualified.

The IRS will not reach out to you about this. The burden is entirely on the taxpayer to act. Even the National Taxpayer Advocate has advised taxpayers to act now and file a protective claim ahead of the July 10, 2026, deadline.

How CTI Can Help

Our tax professionals can review your IRS records, identify any penalties and interest you may be owed, and prepare and file a protective claim on your behalf — well before the July 10, 2026, deadline.

Don’t wait to see how the appeal turns out. The deadline to protect your rights is firm, and getting a claim on file costs far less than missing the window entirely.

Reach out to one of our tax professionals today to find out if you qualify.