COVID-era Tax Refunds: Millions May Get Penalty Rebates – What Taxpayers Must Do

Recent court rulings suggest that COVID-era tax refunds may be due to tens of millions of taxpayers who incurred penalties and interest during the pandemic. The Kwong v. United States decision holds that filing and payment deadlines from Jan. 20 2020 through July 10 2023 – plus a 60‑day buffer – should have been automatically extended.

COVID-era tax refunds – eligibility criteria

Eligible parties span individuals, small firms, large corporations, estates and trusts. Any penalty assessed for late filing or payment within the specified window, as well as accrued interest, qualifies for reversal. Even foreign‑information reporting penalties fall under the umbrella.

Taxpayers can verify exposure by pulling a federal transcript via the IRS portal or the ID.me service. Look for entries dated between Jan. 20 2020 and July 11 2023 that list penalties or interest.

Claim deadline and filing procedure

The statutory window for a refund claim is three years from the date of the original return or two years from the date a penalty was paid, whichever is later. In most cases this sets a cut‑off of ↓ 2026 July 10. Payments made after the period extend the deadline accordingly.

To preserve rights, file a “protective claim” using Form 843. Label the submission with language such as “Protective Refund Claim Pursuant to Kwong Case.” Each tax year and tax type generally requires a separate form unless the instructions allow consolidation.

“The courts have effectively reset the filing clock for the pandemic period,” says National Taxpayer Advocate Erin M. Collins.

Because Form 843 is paper‑only, send it by certified mail to obtain proof of delivery. The IRS does not issue electronic acknowledgments for these filings.

Analysts estimate ↑ 30 million taxpayers could be affected, translating into a potential multi‑billion‑dollar liability for the Treasury. For ongoing coverage, see Reuters and Bloomberg.

Words by: Arthur Sterling

Macroeconomics Editor