Quick Summary

• A federal court ruling in Kwong v. United States found the IRS improperly charged certain penalties and interest between January 20, 2020, and July 10, 2023.
• Taxpayers who paid those charges — even if they paid their balance in full — may be eligible for a refund.
• Retirees, self-employed workers, and small business owners are among those who could qualify.
• Most affected taxpayers must file a claim by July 10, 2026, or risk losing their eligibility permanently.
• The ruling is not yet final; the government may still appeal.

Millions of Americans may be owed money back from the IRS — and many don’t even know it.

CNBC recently reported that the tax deadline may have passed for most filers. Still, a federal court ruling has created an unexpected second chance for millions of taxpayers to recover money paid in pandemic-era penalties and interest.

At the heart of the issue is Kwong v. United States, in which a court ruled that the IRS improperly imposed certain penalties and interest from January 20, 2020, through July 10, 2023. That window covers the official COVID-19 federal disaster period, which ran through May 11, 2023, plus an additional 60 days. The ruling hinged on a provision in the tax code that governs how filing and payment deadlines are handled when a federal disaster is declared.

Who May Qualify

The potential pool of eligible taxpayers is broad. Anyone whose tax payments during the affected period included penalties or interest — even if they ultimately settled their balance in full — may have grounds for a refund. Retirees, self-employed workers, and small business owners are among those who could be affected, depending on their individual filing history.

The Clock Is Ticking

The refund opportunity created by the ruling is real, but it won’t last indefinitely. Under standard IRS rules, taxpayers generally have three years from the date a return was filed, or two years from the date the tax was paid — whichever comes later — to request a credit or refund.

Since the extended pandemic deadline effectively closed on July 10, 2023, most eligible taxpayers are looking at a cutoff of around July 10, 2026. Missing that window could permanently forfeit the right to recover those funds under statute-of-limitations rules. And because the government may still appeal the ruling — potentially affecting how widely refunds are distributed — moving sooner rather than later is a reasonable approach.

How to Check Your Records and File a Claim

Start by confirming whether you paid penalties or interest during the eligible period. Your IRS tax transcripts will show this history and can be accessed online through the IRS’s Get Transcript tool or requested by mail at 800-908-9946.

If your records show qualifying charges, you can pursue a refund by submitting IRS Form 843, which is specifically designed for reclaiming penalties and interest. Given the complexity of the rules and timing involved, consulting a tax professional can help ensure your claim is filed correctly and backed by the right documentation.

One important note: the Kwong ruling is not yet final. The government retains the right to appeal, which could affect the outcome for taxpayers hoping to benefit — another reason not to delay. 

Conclusion 

If the ruling survives a potential government appeal, the financial impact for eligible taxpayers could be significant. National Taxpayer Advocate Erin Collins — who heads the Taxpayer Advocate Service, an independent watchdog organization within the IRS — wrote in an April 30 blog post that the decision could represent a substantial refund opportunity for millions of filers.

Even a modest refund can make a real difference, especially for retirees on fixed incomes already contending with rising costs. Reviewing your filing history sooner rather than later — ideally with the help of a tax professional — is the best way to determine whether you qualify and ensure you don’t miss what may be a narrow window to recover those funds.