As discussed in a recent client alert, taxpayers who were assessed penalties and interest for tax filings or payments due during the COVID-19 federal disaster period may still have time to request a refund. But the deadline for most taxpayers to do so, July 10, 2026, is rapidly approaching. Refund claims filed after that date are likely to be barred by the statute of limitations.

Ordinarily, the deadline to seek a refund of tax, penalties, or interest is the later of: (1) three years from the date the return was filed, or (2) two years from the date the tax, penalty, or interest was paid.[1] Under the usual rule, the deadlines to seek refunds of tax, penalties, and interest for tax year 2022 and earlier periods have in most instances expired.

In Kwong v. United States, the U.S. Court of Federal Claims held that the COVID-19 federal disaster period suspended most federal tax filing and payment deadlines from Jan. 20, 2020 through May 11, 2023, plus an additional 60 days, ending on July 10, 2023.[2] Based on the Court’s reasoning in Kwong, returns and payments due during that period were not late so long as they were filed or paid on or before July 10, 2023. Thus, the IRS should not have assessed late-filing or late-payment penalties, or related interest thereon, because the filings and payment were not, in fact, late.

Relief is not automatic, however. Taxpayers must affirmatively request refunds or abatements of penalties and interest, typically by filing a formal or protective refund claim. The IRS Taxpayer Advocate recently advised affected taxpayers to consider filing protective claims and noted that potentially tens of millions of taxpayers may be affected.[3]

Affected taxpayers may include individuals, businesses, estates, trusts, and tax-exempt organizations that incurred or paid:

• failure-to-file penalties;
• failure-to-pay penalties;
• estimated tax penalties;
• international information return penalties;
• certain other IRS penalties tied to filing or payment deadlines during the COVID-19 federal disaster period; and
• interest attributable to such penalties or allegedly late payments.

Taxpayers who fall into any of these categories should strongly consider filing protective claims for refund on or before July 10, 2026. Filing a protective claim may preserve a taxpayer’s right to a refund while the legal issues remain unsettled.

It is important to note the IRS is challenging the Court of Federal Claims’ decision in Kwong. If the IRS ultimately prevails, many claims for refund of COVID-era penalties and interest may be denied as untimely. If Kwong is upheld, however, potentially millions of taxpayers may be entitled to refunds or abatements – but only if they timely filed claims preserving their rights to refunds.

Taxpayers who were assessed or paid IRS penalties or interest connected to filing or payment deadlines falling between Jan. 20, 2020, and July 10, 2023 should consult their tax advisors promptly regarding whether to file protective refund claims. Should they decide to proceed with a claim for refund, the claim must be filed on or before July 10, 2026. Claims filed after that date will most likely be untimely, even if Kwong is upheld.

[1] Code Sec. 6511.

[2] Kwong v. United States, 179 Fed.Cl. 382 (2025).

[3] Tens of Millions of Taxpayers May Be Eligible for Significant Tax Refunds – If They Act by July 10 (Part I), NTA Blog, April 30, 2026, updated May 7, 2026, available at www.taxpayeradvocate.irs.gov/news/nta-blog/tens-of-millions-of-taxpayers-may-be-eligible-for-significant-tax-refunds/2026/04/.