Common Cents: Why Tens of Millions of Taxpayers May Be Entitled to Refunds of COVID-Era IRS Penalties and Interest — And Why You Must Act Before July 10, 2026

By Nick Richardson and Val Devol | Devol and Associates - Oklahoma Tax Attorneys

A recent decision out of the United States Court of Federal Claims, Kwong v. United States, 179 Fed. Cl. 382, (Nov. 2025), has quietly opened the door for what the National Taxpayer Advocate Service now estimates may be tens of millions of taxpayers to recover IRS penalties and interest assessed during the COVID-19 federal disaster period. The mainstream press has barely touched it. Most taxpayers, and many practitioners, do not yet know the opportunity exists. But the window to preserve a claim is short: for most affected taxpayers, the deadline to file a refund claim or protective claim is July 10, 2026.

If you are an Oklahoma taxpayer who paid a failure-to-file penalty, a failure-to-pay penalty, an estimated tax penalty, or interest on any of the foregoing for any tax obligation with a due date between January 20, 2020 and July 10, 2023, you may be entitled to a refund or abatement. This post explains the holding, who it affects, what relief is potentially available, and the procedural steps that must be taken before the statute of limitations forecloses the claim.

I. What the Kwong Court Actually Held

Kwong concerned a refund suit filed by a California taxpayer challenging penalties the IRS had assessed due to the disaster period established during the pandemic. The court agreed with the taxpayer and held, as a matter of plain statutory text, that the mandatory postponement period for the COVID-19 disaster ran from January 20, 2020 through July 10, 2023 (which is sixty days after the May 11, 2023 termination of the major disaster declaration). Judge Silfen wrote that “[t]he plain meaning of th[e] statute is that the automatic extension runs from the beginning of the disaster declaration, through the end of the declared disaster period, and until 60 days after the end of the declared disaster period.”

In reaching that holding, the court squarely rejected the IRS’s contrary regulation, 26 C.F.R. § 301.7508A-1(g)(3)(ii), which had purported to cap the mandatory postponement at one year. The court declined to defer to the IRS’s reading and instead applied the unambiguous statute as Congress wrote it.

II. How Devol and Associates Can Help

Our firm represents individuals, families, and businesses throughout Oklahoma in IRS controversy and federal tax litigation matters. We are actively assisting clients with the opportunities arising from this decision, and our process is straightforward:

1. Transcript review. We pull your IRS account transcripts for tax years 2019 through 2023 and identify every penalty and interest entry that accrued during the COVID disaster window.

2. Limitations analysis. We confirm the exact Form 843 filing deadline for each year and each taxpayer entity, factoring in payment dates, filing dates, and the section 6511(b)(2) lookback rules.

3. Claim preparation. We prepare and file a properly supported Form 843 protective refund claim, citing IRC § 7508A(d) and Kwong, with attached transcripts and a legal memorandum positioning the claim to survive an IRS challenge.

4. Post-filing representation. We monitor the IRS’s response, coordinate any necessary perfection of the claim, and, if the IRS denies the claim, represent you through Appeals subsequent refund litigation in the proper court of law.

If you have received any IRS notice assessing a penalty or interest for a tax year that touched the COVID disaster window, do not wait. The cost of a transcript review and limitations analysis is modest. The cost of letting the statute run is, for many taxpayers, the entire amount of relief.

III. Why This Matters Far Beyond One Taxpayer

The implications of Kwong extend well beyond the timing of refund suits. By holding that the COVID-19 disaster mandated a statutory postponement of federal tax deadlines for nearly three and a half years, the decision calls into question the IRS’s authority to have assessed late-filing penalties, late-payment penalties, estimated tax penalties, and the related interest on any return or payment with an original due date that fell within that window. If the deadline was statutorily postponed, the return or payment was not late, and a penalty for being “late” should not have attached.

The National Taxpayer Advocate Service (TAS) has publicly recognized that this holding may entitle “tens of millions of taxpayers” to refunds or abatements, including individuals, small businesses, large corporations, estates, trusts, and taxpayers who filed late international information returns. Importantly, the TAS emphasized that “[r]elief will not be automatic — most taxpayers must file refund claims by July 10, 2026.”

The Department of Justice is expected to appeal Kwong, and the IRS continues to take the position that pre-existing delinquencies do not benefit from the postponement. The legal landscape is unsettled. That uncertainty is precisely why filing a properly drafted protective claim now is so important: it preserves your right to a refund regardless of how the appellate courts ultimately rule.

IV. Who in Oklahoma May Be Affected

This is not a niche issue limited to large corporations or sophisticated taxpayers. The COVID-19 major disaster declaration applied nationwide. Practically every taxpayer, entity, trust, or business with a federal tax obligation due between January 20, 2020 and July 10, 2023 should review their IRS account transcripts. Categories of taxpayers most likely to benefit include:

• Individuals who paid failure-to-file or failure-to-pay penalties on their 2019, 2020, 2021, or 2022 income tax returns;

• Self-employed taxpayers and small business owners assessed estimated tax penalties under 26 U.S.C. § 6654 for any quarter falling within the disaster period;

• S corporations, partnerships, and LLCs assessed late-filing penalties on Forms 1120-S, 1065, or related returns;

• Employers assessed payroll tax penalties on Forms 941 with quarters falling within the COVID disaster window;

• Estates and trusts assessed penalties on Forms 1041 or estate-tax filings during the relevant period;

• Taxpayers with international information return penalties (e.g., Forms 5471, 8938, 8865, and FBAR-related Title 26 penalties), which can be substantial even when no underlying tax is owed; and

• Taxpayers currently under examination, in IRS Appeals, or in active litigation for any tax year touching the disaster window — for whom the Kwong issue may meaningfully reshape settlement leverage.

The dollar amounts at stake range from a few hundred dollars to, in the case of larger businesses and international filers, hundreds of thousands of dollars or more.

IV. The Procedural Path: Form 843 and the Protective Claim

Under 26 U.S.C. § 6511(a), a refund claim must generally be filed within three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Because Kwong itself reads section 7508A(d) to disregard the period from January 20, 2020 through July 10, 2023, the practical filing benchmark for most COVID-period claims is July 10, 2026. For some taxpayers, the deadline may be sooner. A limitations analysis of your specific facts is essential, and it should not wait.

The administrative vehicle is IRS Form 843, Claim for Refund and Request for Abatement. Because the underlying legal question is unsettled and may take years to be conclusively resolved on appeal, the strongest course of action for most taxpayers is to file a protective refund claim. To ensure that the Form is adequately completed and timely filed, it is crucial for each taxpayer to work with an experienced and qualified representative throughout the process. 

A protective claim filed before July 10, 2026 generally preserves the taxpayer’s rights even if the precise computation must be supplemented later, and even if the appellate resolution of Kwong takes additional years. Failing to file before the limitations period closes generally extinguishes the claim entirely. Form 843 cannot currently be filed electronically, and must be mailed directly to the appropriate IRS office.

V. The Risks of Waiting — and the Risks of Filing Without Counsel

Two practical risks bear emphasis:

First, the July 10, 2026 deadline is not flexible. Once the limitations period closes on a given tax year, no refund can be recovered, even if Kwong is later upheld by the Federal Circuit or the Supreme Court. The TAS has called on the IRS to grant a six-month administrative extension under 26 U.S.C. § 6081, but as of this writing, no such extension has been granted. Taxpayers who wait for one do so at their peril.

Second, a deficient or unsupported claim can be rejected on procedural grounds, and a rejected claim can foreclose the right to litigate the underlying issue. The Form 843 must be properly drafted, must identify the specific years and amounts in issue, must articulate the legal basis, and must be supported by the relevant IRS account transcripts. The variation rule of 26 U.S.C. § 7422 confines any later refund suit to the grounds raised in the administrative claim. A poorly drafted claim today can hand the IRS a procedural defense tomorrow.

Schedule a Consultation

The deadline is real. The window is short. And once it closes, there is no reopening it.

If you are located in Oklahoma City, Edmond, Norman, Moore, Yukon, Mustang, Guthrie or anywhere else Oklahoma, our tax attorneys are available to evaluate your situation, pull your transcripts, and file a protective refund claim before the upcoming July 10, 2026 deadline.

Call (405) 225-2300 or email receptionist@devollaw.com today to schedule a confidential consultation. We are happy to walk you through what the Kwong decision means and its impact towards your specific tax history, and there is no obligation to retain us simply to learn whether you have a claim worth pursuing.

Devol and Associates

15205 Traditions Lake Parkway

Edmond, OK 73013

(405) 225-2300 | receptionist@devollaw.com | devollaw.com

This blog post is for general informational purposes only and does not constitute legal or tax advice. The Kwong decision is a Court of Federal Claims opinion that may be appealed; outcomes depend on the specific facts of each taxpayer’s situation. Reading this post does not create an attorney-client relationship with Devol and Associates. For advice on your particular circumstances, please contact our office to schedule a consultation.