Critical Deadline Approaching for Taxpayers Entitled to Relief From Penalties and Interest Assessed During Pandemic

Taxpayers entitled to refunds or abatements of penalty amounts imposed during the COVID-19 pandemic must file claims for the refunds for which they are eligible by July 10, 2026. This deadline may affect tens of millions of taxpayers eligible for refunds.

What to Know

Taxpayers who paid or were assessed late payment or late filing penalties during the COVID-19 disaster relief period, from January 20, 2020 to May 11, 2023, may be entitled to a refund or reduction of assessed penalties. Potentially affected taxpayers have until July 10, 2026 (three years plus 60 days after the end of the disaster period) to file a claim if their return was filed and tax was paid before July 10, 2023, and may have a later deadline if they paid the relevant tax on a later date. Taxpayers should promptly review their records and/or obtain a copy of their U.S. Internal Revenue Service (IRS) tax transcript to confirm whether they may be entitled to a refund or reduction of assessed penalties and interest and to ensure they do not miss a deadline. Taxpayers who cannot yet determine the amount of a formal refund request may nonetheless want to file a protective claim to preserve their rights. Taxpayers should reach out to their accountants or tax counsel to advise them on their rights to ensure this deadline is not missed.

Background

In Kwong v. United States, 179 Fed. Cl. 382 (2025), the United States Court of Federal Claims ruled that Internal Revenue Code (IRC) § 7508A(d) served to toll the deadline for tax filings and payments during the COVID-19 pandemic (the Pandemic). The federal disaster declaration for the Pandemic was in place from January 20, 2020 to May 11, 2023. During the Pandemic, IRC § 7508A changed several times. Under the 2019 version of the statute, which Kwong argued should apply, the automatic extension period ran from the earliest date of the emergency until 60 days after the emergency ended. Kwong had been issued penalties for failing to pay his tax returns in a timely manner, and he argued that his three-year period to file a suit challenging his tax liabilities was timely because it was filed before July 10, 2023 — or 60 days after the May 11, 2023 end date in the federal disaster declaration. The government argued that a later version of the statute, which limited the extension to 60 days after the declaration of the emergency, should apply. The court agreed with Kwong and found that, under IRC § 7508A(d), tax filing and payment deadlines were automatically extended for the entire federal disaster declaration period plus 60 days, or from January 20, 2020, to July 10, 2023.

Implications

Because the court in Kwong interpreted IRC § 7508A(d) as mandating a “deadline pause” for the entire window of January 20, 2020, to July 10, 2023, taxpayers who paid failure-to-file or failure-to-pay penalties, estimated tax penalties, and associated interest incurred or accrued during that window may be eligible for a refund or abatement.

Potentially tens of millions of taxpayers were assessed late filing and/or late payment penalties during the period in question. In the normal course, a taxpayer must file a claim for a credit or refund on the later of three years from the date their tax return was filed, or two years from the date they paid the tax. However, based on the court’s decision in Kwong, returns and payments otherwise due during the disaster window would not have been due until July 10, 2023. This means that taxpayers who filed a late return during the pandemic, paid the tax due, and were assessed penalties or interest may be entitled to file a claim for credit or refund by filing on or before July 10, 2026 — or their deadline may be extended even further depending on when they paid the penalties and interest at issue. Significantly, the “deadline pause” the court applied in Kwong may also affect taxpayers who filed late international information returns even if no tax was due and were assessed penalties.

Types of Potential Claims

Taxpayers affected by the Kwong decision should understand there are three types of claims or requests they could file to protect their rights. First, there is a refund claim, which is a request to the IRS to return money that has already been paid. Second, there is a protective refund claim, which asks the IRS to preserve the taxpayer’s right to a refund when (1) the taxpayer cannot yet determine the final amount, or (2) the taxpayer’s right to the refund is dependent on some future event (such as a legal development). Third, there is an abatement request, which applies if tax has been assessed but not yet paid; the taxpayer is asking the IRS to abate or remove all or part of the outstanding amount due.

What’s Next?

If you think you may be entitled to a Kwong-related refund, consider which type of claim you may want or need to file.

• Refund claims to adjust underlying tax liability are made on Form 1040, U.S. Individual Income Tax Return (if the taxpayer has not yet filed their return), or Form 1040-X, Amended U.S. Individual Income Tax Return (if the taxpayer needs to change a previously filed return).
• A claim for a refund of interest or penalties or a claim for abatement should be made on Form 843, Claim for Refund and Request for Abatement. Be sure to write “Protective Refund Claim Pursuant to Kwong Case” or similar language across the top of the Form 843, and clearly state that the request is based on the COVID-19 disaster relief period and cite the legal reasoning from Kwong. Taxpayers should note that it is very important to file a separate Form 843 for each period and each type of tax. Additionally, Form 843 cannot be filed electronically and should be sent by certified mail to the same IRS service center that processes your tax return to prove timely submission.
• To strengthen any claim for refund, a taxpayer should include a copy of the taxpayer’s tax transcript with relevant entries identified if possible, a clear identification of penalty and interest amounts, copies of any IRS correspondence, and an explanation tying the penalties to the disaster relief period.

Arnold & Porter has the technical knowledge and expertise to assist clients in filing formal claims for refund, protective claims for refund, and requests for abatement. If you would like to discuss the Kwong decision and how it may affect your right to file a claim for refund or abatement, please contact any of the authors of this Advisory or your usual Arnold & Porter contact.

* Micah Sperling contributed to this Advisory. Micah is employed as an associate in Arnold & Porter’s New York office.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.