Millions of taxpayers in the United States could be entitled to recover money from the Internal Revenue Service (IRS) for penalties and interest collected during the COVID-19 pandemic. However, there is an important detail: the refund is not automatic. Those who believe they may be eligible must file a claim by July 10, 2026 to preserve their right to receive the money.

The opportunity arises from the court case Kwong v. United States, in which a federal court determined that the IRS may have improperly applied penalties during the national emergency period declared by the pandemic.

Who might be entitled to a refund?

According to the National Taxpayer Advocate, those who:

The recommendation is to review the tax history to identify if there were charges of this type.

Why is there this possible refund?

The court that analyzed the Kwong case concluded that the COVID-19 health emergency qualified as a national disaster under certain provisions of the tax code.

Under that interpretation, the deadlines to comply with certain tax obligations should have been automatically extended, which would call into question the legality of some penalties and interest charged by the IRS during that period.

However, the litigation is not yet fully resolved, and the government has expressed its disagreement with the ruling.

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Why you should file a claim as soon as possible

So why file the claim now? Because time is ticking. The National Taxpayer Ombudsman recommends filing a “protective claim” before July 10, 2026 to avoid definitively losing the right to request a refund if the court decision ends up favoring taxpayers.

In other words, filing now doesn't guarantee you'll receive money, but it does protect your ability to claim it in the future.

How to request a possible refund from the IRS

Taxpayers must:

Currently, this procedure cannot be carried out electronically.

What you should take into account

Before starting the process, experts recommend consulting with a tax professional, especially if the returns are complex or involve companies.

Additionally, it is important to remember that not all taxpayers qualify, and the final outcome will depend on how the litigation is resolved in court.

For now, the message from the National Taxpayer Defender's Office is clear: if you believe you paid penalties related to tax obligations during the pandemic, do not wait until the last minute to find out if you can claim that money.