If you paid the IRS a late-filing penalty, a late-payment penalty, an estimated-tax penalty, or interest on any of those between January 2020 and July 2023, the federal government may owe you money back. Most people who qualify don't know it. The window to claim closes July 10, 2026.
What the court actually said
On November 25, 2025, the U.S. Court of Federal Claims decided Kwong v. United States, 179 Fed. Cl. 382. The plaintiffs argued that the IRS improperly assessed penalties on tax returns that were originally due during the COVID-19 disaster declaration. Under Internal Revenue Code §7508A(d), when a federally declared disaster postpones a tax deadline, certain penalties and interest cannot be assessed for the postponement period. The court agreed. The IRS, in many cases, did not apply that postponement correctly.
The decision affects penalties and interest assessed on returns originally due between January 20, 2020 and July 10, 2023 — which covers tax years 2019, 2020, 2021, and 2022.
Why this matters to ordinary taxpayers
This is not an exotic situation. If you filed a return late during those years, paid your taxes late, or got hit with an estimated-tax penalty, you very likely paid something the court has now said you shouldn't have owed. A freelancer who underpaid quarterly estimates in 2020. A small business owner who filed an extension and missed the extended deadline. A family that owed unexpectedly at filing time and couldn't pay until later. Penalties for all of these may be refundable.
The IRS is not refunding this money automatically. They are contesting the ruling. If you don't file, your claim is barred — regardless of how the appeal resolves.
What you must do
The statute of limitations to file a refund claim runs out three years from the original return deadline. For tax year 2022, that means July 10, 2026. To preserve your right to a refund, you must file a “protective” Form 843 refund claim with the IRS before that date, citing the Kwong decision and the statutory basis under §7508A(d). If the case is ultimately upheld on appeal, your claim is preserved. If you do not file, your claim is permanently barred — even if Kwong stands.
How it works, briefly
The process is straightforward in concept. Pull your IRS account transcripts for tax years 2019 through 2022, identify the penalties and interest assessed in the Kwong window, prepare a Form 843 for each affected year with the proper statutory citation, and file before the deadline. You can do this yourself, work with a CPA, or hire a tax attorney. What matters is that it gets done.
The honest caveats
A protective claim does not guarantee a refund. The IRS will almost certainly hold the claim while the appellate process plays out. If Kwong is upheld, you collect — though we expect the IRS will take twelve to thirty-six months to process the refund. If the decision is reversed, you do not collect. That risk is real.
The calculation, though, is straightforward: the cost of filing a protective claim — even one that ultimately fails — is dramatically lower than the cost of forfeiting a refund window for taxes you should not have paid in the first place.
The deadline behind the deadline
One last operational point. IRS transcripts take roughly two weeks to retrieve after a Power of Attorney is processed. Form 843 preparation takes another week or so. If you intend to engage a professional, plan to do it no later than mid-June — three weeks before the statutory deadline — or risk running out of time.
The kind of work a practice should be doing without being asked
A federal court decision opens a refund window. The window has a hard expiration date. Most affected taxpayers will never learn about it from the IRS, from their broker, or from the news. They will not learn about it at all.
That is a failure mode of traditional professional services — and it is a fixable one. The firms that will matter in the next decade are the ones that combine deep professional judgment with the systems to apply it at scale: scanning the legal landscape for changes that affect specific clients, identifying who is affected before the client knows to ask, and executing accurately under deadline. A decade ago, that kind of practice was impossible at small-firm scale. Today, with the right tools and discipline, it is becoming the standard.
This is one of those moments where the difference between the two practice models is visible in real money. Either someone is watching for you, or no one is.