IRS Refunds Could Be in Store for Millions of U.S. Taxpayers: Key Details You Need to Know

Millions of taxpayers across the United States may be eligible for refunds or reductions on penalties and interest imposed by the IRS during the COVID-19 pandemic, as outlined in an urgent alert issued by the National Taxpayer Advocate in April of this year.

A Court Decision Opens New Avenues

This opportunity arises from a November 2025 ruling by the U.S. Court of Federal Claims in the case of Kwong v. United States. The decision reinterpreted a tax code provision related to deadline extensions during federal disaster declarations.

The court ruled that Section 7508A(d) of the Internal Revenue Code automatically suspended all tax filing and payment deadlines during the COVID-19 disaster period, which spanned from January 20, 2020, to May 11, 2023. With an additional 60 days included by law, this tax protection period extends until July 10, 2023.

The ruling states: "The literal meaning of this law is that the automatic extension runs from the start of the disaster declaration until the end of the declared period and for 60 days thereafter."

As a result, according to the Taxpayer Advocate, "the IRS should not have imposed late filing or payment penalties during that three-and-a-half-year period, nor should it have charged interest on those amounts."

Who Can Benefit?

The scope is broad, affecting individuals, small businesses, large corporations, estates, and trusts. The ruling impacts obligations relating to income, employment, estate, gift, and excise taxes. It may also benefit those who filed late international information returns with significant penalties, even if no taxes were owed.

Eligible amounts include penalties for late filing or payment, penalties for insufficient estimated payments, and interest that began accruing prematurely.

Act Before the Deadline

National Taxpayer Advocate Erin M. Collins emphasizes that this benefit is not automatic. Most taxpayers must submit a formal request by July 10, 2026, which is three years from the end of the extended period.

The recommended form is IRS Form 843 (Claim for Refund and Request for Abatement). Experts suggest including the phrase "Protective Refund Claim Pursuant to Kwong Case" to secure rights while litigation is ongoing.

The first step is to review your IRS account transcript on IRS.gov to identify potentially refundable penalties. Staying informed about tax changes in the U.S. for 2026 can also provide clarity on the current tax landscape.

Challenges for Low-Income Taxpayers

Collins warned that low- to moderate-income taxpayers are at greater risk of missing this opportunity due to a lack of professional representation. "Without intervention from the IRS or Congress, outcomes could unfairly favor the 'well-advised' over the 'uninformed,'" she noted.

This concern is especially pertinent to the immigrant community, which already faces additional fears when filing taxes under current circumstances.

The Government Plans an Appeal

The IRS and the Department of Justice disagree with the court's interpretation and are expected to appeal the decision. Experts anticipate that resolving the case could take several years, but the Taxpayer Advocate advises taking action now to avoid losing rights due to the statute of limitations.

Since the start of the tax season in the U.S., this ruling has caught the attention of tax advisors and taxpayers alike. "For those facing financial pressures, these amounts can make a substantial difference. However, most must act before July 10, 2026, to claim potential refunds," Collins concluded.