IRS COVID penalty refunds after Kwong: Who qualifies?

Some US taxpayers may now qualify for refunds of IRS penalties and related interest connected to filing or payment delays during the COVID-19 disaster period, following the 2025 Kwong v. United States ruling.

The case may extend the deadline for filing refund claims until July 10, 2026, potentially affecting late filing penalties, late payment penalties, interest charges, and certain other IRS assessments tied to the COVID disaster period.

Published on: May 26, 2026

Written by: Clark Stott

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In this article

What is the Kwong v. United States case?

Kwong v. United States is a 2025 Court of Federal Claims case concerning IRS penalty refund deadlines during the COVID-19 pandemic. The Court of Federal Claims ruled that certain federal tax deadlines during the COVID-19 disaster period, specifically, January 20, 2020, to July 10, 2023, may have been postponed under Internal Revenue Code Section 7508A.

The ruling does not create a new stimulus payment program. Taxpayers are not receiving a new Economic Impact Payment or COVID rebate check. Instead, the case affects the deadline for requesting refunds of certain IRS penalties and related interest.

What is this not?

This is not a new stimulus check
This is not an automatic IRS refund
This is not guaranteed relief
This is not a blanket refund for every IRS penalty

Why are taxpayers now claiming IRS COVID penalty refunds?

Taxpayers are now claiming IRS COVID penalty refunds because the Kwong v. United States ruling raised the possibility that COVID disaster relief extended the deadline for requesting certain IRS refunds.

Normally, taxpayers only have a limited time to request refunds for IRS penalties or interest. In many cases, the deadline is based on the later of:

Three years from the tax return filing date, or
Two years from the date the penalty or tax was paid.

However, the Kwong ruling accepted the position that the COVID disaster period temporarily paused certain normal deadlines for filing refund claims

If that interpretation ultimately holds, some taxpayers who thought their refund window had already expired may still be able to file claims for penalties and interest paid during the pandemic years.

Table 1. COVID disaster relief timeline

Date	Event
Jan. 20, 2020	The COVID disaster period begins
May 11, 2023	Federal emergency officially ends
July 10, 2023	Potential end of the postponed deadline period, 60 days after the federal emergency ended
July 10, 2026	Possible refund claim deadline

Who qualifies for IRS COVID penalty refunds?

Taxpayers who paid certain IRS penalties or interest during the COVID-19 relief period may qualify for refunds. Eligibility depends on:

When the penalty was assessed
When it was paid
The type of penalty involved
The taxpayer’s filing history

Table 2. Taxpayers who may be affected

Taxpayer type	May qualify?
Individual taxpayers	Yes
Self-employed taxpayers	Yes
Small businesses	Yes
Americans abroad	Yes
Trusts and estates	Yes

The taxpayers most commonly discussed include:

Taxpayers who filed returns late during the COVID-19 relief period
Taxpayers who paid failure-to-file penalties
Taxpayers assessed failure-to-pay penalties
Self-employed individuals facing estimated tax penalties
Taxpayers who are dealing with delayed international filings

How do I know if I qualify for a COVID IRS penalty refund?

The fastest way to check possible eligibility is to review your IRS account transcripts and identify penalties or interest tied to filing or payment deadlines during the COVID disaster period.

Who should check their IRS transcript?

You may want to investigate further if these scenarios apply to you:

You filed a 2020, 2021, or 2022 return late
You paid failure-to-file or failure-to-pay penalties
You paid interest connected to late tax payments
You received penalty notices during or after the COVID years
You filed several late returns at once
You live abroad and have had delayed IRS mail or a filing disruption

Which IRS penalties are included in COVID refund claims?

The Kwong ruling has focused primarily on common penalties imposed during the COVID disruption years. The National Taxpayer Advocate has identified several penalties and interest categories that may qualify for refund claims or protective filings.

Table 3. Penalties discussed in COVID-era refund claims

Penalty or charge	Included in current refund discussions?
Failure-to-file penalties	Yes
Failure-to-pay penalties	Yes
Estimated tax penalties	Yes
Interest connected with affected penalties or postponed payment obligations	Yes
International information return penalties	Unclear

International information return penalties

International reporting penalties tied to forms such as Form 5471, Form 3520, and FBAR filings are generally treated differently from ordinary late-filing or late-payment penalties.

These forms may include:

Form 5471 (foreign companies)
Form 3520 (foreign trusts and gifts)
Form 8938 (foreign financial assets under FATCA)
Form 8865 (foreign partnerships)
FBAR / FinCEN Form 114 (foreign bank accounts)

The Kwong ruling mainly focuses on penalties tied to regular tax filing and payment deadlines during the COVID disaster period. International reporting penalties often follow different legal rules.

That means taxpayers should avoid assuming every FBAR or foreign reporting penalty automatically qualifies for a refund. It is usually best to have those penalties reviewed separately before filing a refund claim.

Which tax forms are involved in COVID-era IRS penalty refund claims?

The forms most commonly discussed in COVID-era IRS penalty refund claims include Forms 1040, 1120, 1120S, 1065, 940, 941, 943, 944, certain 1099 and 1095 information returns, and potentially some international reporting forms such as Form 8938.

Table 4. Tax forms discussed in COVID-era penalty refund claims

Form	What it is	Common penalty involved
Form 1040	US Individual Income Tax Return	Failure-to-file, failure-to-pay, estimated tax penalties
Form 1120	US Corporation Income Tax Return	Failure-to-file, failure-to-pay penalties
Form 1120S	US S Corporation Income Tax Return	Late filing penalties
Form 1065	US Partnership Return	Partnership late filing penalties
Form 940	Employer’s Annual Federal Unemployment (FUTA) Tax Return	Payroll tax penalties
Form 941	Employer’s Quarterly Federal Tax Return	Payroll tax and deposit penalties
Form 943	Employer’s Annual Tax Return for Agricultural Employees	Payroll-related penalties
Form 944	Employer’s Annual Federal Tax Return	Payroll tax penalties
Form 1099 series	Information returns for payments to contractors and others	Information return penalties
Form 1095 series	Health coverage reporting forms under the ACA	Information return penalties
Form 8938	Statement of Specified Foreign Financial Assets	International information return penalties

The forms most often discussed are those with filing, payment, payroll deposit, or information reporting deadlines that may have fallen during the COVID disaster postponement period. Not every penalty connected to these forms is automatically covered by the Kwong ruling.

Can Americans abroad qualify for COVID penalty refunds?

Yes. Some Americans abroad may qualify for refunds involving late-filing penalties, late-payment penalties, or related interest connected to Form 1040 obligations during the COVID years.

Many Americans overseas also experienced delayed IRS correspondence. Some penalty notices arrived months late. Others were sent to outdated addresses while taxpayers were moving between countries during lockdowns.

For example, a taxpayer with little or no US tax liability could still face large penalties for late international reporting forms or delayed filings.

Whether those penalties ultimately qualify depends on the specific facts and procedural posture of the case. Still, Americans abroad should not ignore the Kwong discussion simply because most relief focuses on domestic taxpayers.

How can I claim an IRS COVID penalty refund?

Taxpayers generally need to review penalties, gather records, determine eligibility, and potentially file Form 843 or a protective refund claim before applicable deadlines expire.

Here’s a step-by-step guide to claiming penalty refunds.

Step 1. Review IRS account transcripts

This helps identify:

Penalty types
Assessment dates
Interest charges
Affected years

Step 2. Identify COVID-era penalties

Focus especially on:

Failure-to-file penalties
Failure-to-pay penalties
Related interest
Assessments during the COVID relief period

Step 3. Gather supporting records

Collect:

IRS correspondence
Proof of payment
Prior tax filings
Records explaining COVID-related disruptions

Taxpayers abroad may also want documentation showing international mail delays, travel restrictions, and/or foreign office closures.

Step 4. Review whether Form 843 or a protective claim may apply

Some taxpayers may file direct refund claims immediately. Others may choose protective refund claims while legal developments continue unfolding.

The best filing strategy depends on the taxpayer’s penalty history, payment dates, and procedural timeline.

Step 5. Consider acting before July 10, 2026

Even though the law may continue evolving, many practitioners recommend reviewing eligibility sooner rather than later.

From a procedural standpoint, preserving rights early is often safer than scrambling near a possible statute deadline.

What is Form 843 and why does it matter?

Form 843 is the IRS form commonly used to request refunds or abatements for certain penalties and interest. In most cases, taxpayers should file a separate Form 843 for each tax period and each type of tax, unless the Form 843 instructions clearly allow combining them.

Form 843 allows taxpayers to request:

Penalty abatement
Refund claims
Interest adjustments
Certain tax corrections

The distinction between a refund and an abatement matters here. If you have already paid the penalty or interest, you are generally requesting a refund. If the IRS assessed the amount, but it remains unpaid, then you can request an abatement instead.

Can Form 843 be filed electronically?

No. Currently, Form 843 generally must be paper-filed. That creates practical concerns, especially for Americans abroad. Because many taxpayers are filing protective claims tied to the July 10, 2026 deadline, mailing records matter more than usual.

Taxpayers should consider using tracked mail, courier services, or certified mail so they can document when the form was mailed. Keeping complete copies of the filing package, including supporting documents and mailing receipts, is also a smart precaution.

What is a protective refund claim?

A protective refund claim helps preserve a taxpayer’s refund rights while courts continue deciding how the Kwong ruling applies.

Because the IRS and Treasury are contesting the ruling, many taxpayers are filing now to preserve their rights rather than waiting for the courts to fully settle the issue.

Note: A protective claim does not guarantee approval. However, it may help taxpayers preserve their right to receive a refund later if the courts ultimately uphold or expand the COVID disaster relief rules.

Are IRS COVID penalty refunds automatic?

No. IRS COVID penalty refunds are generally not automatic, and many taxpayers may need to file Form 843 to preserve potential refund rights before the July 10, 2026, deadline.

Right now, taxpayers may still need to:

Identify eligible penalties and interest
Confirm whether refund deadlines still apply
Prepare supporting documentation
File refund claims directly with the IRS

The IRS usually requires taxpayers to file formal refund claims when court cases and filing deadlines are involved. You should not assume the IRS will protect your refund rights automatically if you take no action.

What is the July 10, 2026 IRS refund deadline?

July 10, 2026, is generally viewed as the key deadline for many taxpayers to file refund or protective claims tied to the Kwong ruling and COVID-era IRS penalties.

Why the deadline matters

Some taxpayers may prefer to wait for:

Additional IRS guidance
Appeals court decisions
More clarity from future cases

Those concerns are understandable. However, waiting could create problems if the refund deadline expires first. Preserving your refund rights now is safer than waiting for complete certainty that may arrive after the filing window closes.

In other words, some taxpayers are filing protective claims not because the outcome is guaranteed, but because missing the deadline could permanently eliminate the ability to seek a refund later.

Frequently Asked Questions

What is the COVID penalty refund?
The COVID penalty refund refers to possible refunds or abatements of certain IRS penalties and related interest charged during the COVID-19 disaster period. The issue follows the Kwong v. United States ruling, which may extend refund-claim deadlines for some taxpayers. Relief is not automatic, and many taxpayers may need to file IRS Form 843 or a protective refund claim by July 10, 2026.
Can US expats claim IRS COVID penalty refunds?
Yes, some Americans abroad may potentially qualify for IRS COVID penalty refunds if they paid penalties during the COVID disruption years.

This may include penalties connected to late tax filings, delayed payments, or certain international reporting issues affected by pandemic disruptions.

However, foreign reporting penalties tied to forms like FBAR, Form 5471, or Form 8938 often follow separate legal rules and may require additional review before filing refund claims.
How do I request an IRS penalty refund?
Taxpayers typically request IRS penalty refunds by reviewing their penalties, gathering records, and filing Form 843 or another appropriate refund claim.

The process usually involves:

Reviewing IRS notices and transcripts

Identifying penalties paid during the COVID period

Gathering supporting documents

Filing Form 843 or a protective refund claim before applicable deadlines

Some taxpayers may also choose to work with a tax professional, especially if multiple tax years or international reporting penalties are involved.
How do I appeal an IRS late filing penalty?
You can appeal an IRS late filing penalty by responding to the IRS notice and explaining why the penalty should be removed or refunded.

Common reasons may include:

Reasonable cause

Disaster relief

COVID-related disruptions

Procedural issues connected to the assessment.

In some situations, taxpayers may also file Form 843 to request a refund or abatement of penalties already paid.
Can I file Form 843 abroad?
Yes. Americans living overseas can generally file Form 843 from abroad. However, international taxpayers should:

Keep copies of all documents

Track mailing records carefully

Allow additional time for international delivery and IRS processing.

Expats dealing with foreign reporting penalties may also want additional review before filing claims.
What if I lost my IRS penalty records?
If you lost your IRS penalty records, you can usually request IRS account transcripts to review penalties, interest charges, and payment history.

Taxpayers can often obtain these records by either:

Requesting transcripts directly from the IRS online

Calling the IRS

Submitting Form 4506-T, Request for Transcript of Tax Return.

Many taxpayers no longer have complete records from the COVID years, so transcripts often become the starting point for reviewing possible refund claims.
What happens if I miss the IRS refund deadline?
Missing the IRS refund deadline may prevent you from recovering penalties or interest tied to COVID-era claims.

July 10, 2026, is being treated as a key deadline for many potential claims because it is based on the extended COVID-era filing period that ended on July 10, 2023. Once the statute of limitations expires, taxpayers generally cannot file new refund claims, even if future court decisions later support the legal position raised in the Kwong case.

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.