Potential COVID-Era Tax Refund Claims and Why July 10, 2026 May Matter
The IRS has appealed a recent taxpayer-favorable court decision that could affect certain refund claims involving COVID-era tax penalties, interest, and possibly missed refund opportunities for tax years 2019 through 2022.
How a Recent Court Decision Could Extend Certain Refund Deadlines
In a recent Journal of Accountancy article, “IRS appeals Kwong as advocate says refunds may be at stake,” the AICPA reported that the IRS has appealed the decision in Kwong v. United States, 179 Fed. Cl. 382 (2025). In that case, the Court of Federal Claims held that certain filing and payment deadlines were automatically postponed under Internal Revenue Code Section 7508A(d) because of the federal COVID-19 disaster declaration.
The issue is significant because, under the court’s reasoning, certain tax deadlines may have been extended through July 10, 2023. If that interpretation is ultimately upheld or applied more broadly, some taxpayers may still have time to file refund claims or protective claims that otherwise may appear to be barred under the normal statute of limitations.
What this could mean for taxpayers
The National Taxpayer Advocate has indicated that the Kwong decision may have implications beyond penalties and interest. Depending on a taxpayer’s facts, the decision could potentially affect refund claims for tax years 2019, 2020, 2021, and 2022, including situations where taxpayers had withholding, estimated tax payments, refundable credits, or other overpayments but did not timely file a return or amended return.
Potentially affected taxpayers may include:
- Individuals or businesses that paid late-filing, late-payment, or estimated tax penalties during the COVID disaster period;
- Taxpayers who paid interest connected to those penalties or late payments;
- Taxpayers who did not file original returns for 2019 through 2022 but had withholding, estimated payments, or refundable credits;
- Taxpayers who may benefit from filing an amended return for one of those years; and
- Taxpayers who previously assumed the time to claim a refund had expired.
The law is still unsettled
It is important to understand that Kwong is not the final word. The IRS has appealed the decision, and future court rulings could affirm, narrow, distinguish, or reject the broader implications of the case. The IRS has also taken a narrower position in related guidance involving Section 7508A(d), generally arguing that the provision does not automatically suspend deadlines as broadly as the taxpayer-favorable cases suggest. As a result, filing a refund claim or protective claim does not guarantee that the IRS will allow the refund.
However, because refund deadlines can expire even while the courts are still deciding the issue, some taxpayers may need to act before the issue is fully resolved.
Why July 10, 2026 is important
For many potentially affected taxpayers, July 10, 2026 may be an important deadline to preserve refund rights. This date is significant because, if certain COVID-era deadlines are treated as postponed through July 10, 2023, then the normal three-year period for filing certain refund claims may expire on July 10, 2026.
Taxpayers who may have paid penalties, interest, or taxes connected to the affected years should review their facts before that date. In some cases, a protective refund claim may be appropriate. A protective claim is designed to preserve a taxpayer’s right to a refund while a legal issue is still pending.
What Keystone CPAs recommends
Keystone CPAs is reviewing this development closely. Because the rules are still being litigated, we recommend that potentially affected taxpayers take a careful, fact-specific approach rather than assuming that a refund is automatically available.
Taxpayers should consider reviewing:
- IRS account transcripts for 2019 through 2022;
- Penalties and interest assessed or paid during the COVID disaster period;
- Late-filed or unfiled returns;
- Refundable credits, withholding, or estimated tax payments that may not have been claimed;
- Prior amended returns or denied refund claims; and
- Any deadlines that may be affected by the Kwong decision or related litigation.
For taxpayers with meaningful potential refunds, filing a protective claim before July 10, 2026 may be a prudent step. The appropriate filing method will depend on the type of claim. Penalty and interest refund claims are often made on Form 843, while income tax refund claims may require an original return, amended return, or other protective claim filing.
Final takeaway
The Kwong decision could create refund opportunities for some taxpayers, but the law remains unsettled and the IRS is actively challenging the decision. Taxpayers should not assume they qualify automatically, but they also should not ignore the potential July 10, 2026 deadline.
If you paid IRS penalties or interest during the COVID-era period, failed to file a return for 2019 through 2022, or believe you may have missed a refund opportunity, contact Keystone CPAs. Our team can help evaluate whether a refund claim or protective claim should be filed before the potential deadline.