Taxpayer Advocate Encourages Taxpayers to Claim COVID-Era Refunds Before July 10

(Parker Tax Publishing May 2026)

In an April 30 blog post, the National Taxpayer Advocate stated that tens of millions of taxpayers may be entitled to refunds or abatements of penalties and interest the IRS assessed during the nearly 3.5-year COVID-19 federal disaster period if they file claims by July 10, 2026. The Taxpayer Advocate explained that this opportunity is available due to recent court decisions, most notably Kwong v. U.S., 2025 PTC 387 (Fed. Cl. 2025), where the Court of Federal Claims held that the 2019 version of Code Sec. 7508A(d) provided for the automatic postponement of filing and payment deadlines during the period a federal disaster declaration is in effect, plus 60 days.

This issue arises primarily from the decision of the Court of Federal Claims in Kwong v. U.S., 2025 PTC 387 (Fed. Cl. 2025). In that case, the court held that the version of Code Sec. 7508A(d) in effect in 2019 provided an automatic extension of filing and payment deadlines to run from "the earliest incident date" to "60 days after the latest incident date." The plain meaning of the statute, the court found, was that the automatic extension ran from the beginning of the COVID-19 disaster declaration, through the end of the declared disaster period, and until 60 days after the end of the declared disaster period.

For COVID-19, the disaster declaration was in effect from January 20, 2020, through May 11, 2023. Sixty additional days extended the period to July 10, 2023. The Taxpayer Advocate explained that, based on the court's reasoning in Kwong, filing and payment deadlines were postponed during that entire period, and as a result, tax returns and payments due any time within that window were not late until after July 10, 2023. The IRS should not have assessed penalties for late filing or payment during that 3.5-year period, nor charged interest on those amounts.

The Taxpayer Advocate stated that, under Kwong, taxpayers may be entitled to a refund or abatement of certain amounts assessed during the COVID-19 pandemic, including:

Penalties assessed for failure to file timely returns, failure to pay taxes, or failure to make estimated tax payments;

Interest that began accruing earlier than it should have, or not at all; and

Overpayment interest for the 2020-2023 disaster period.

Observation: In Kwong, the government argued that under Reg. Sec. 301.7508A-1(g)(3)(ii), the mandatory 60-day postponement period under Code Sec. 7508A(d) will in no event be calculated to exceed one year. The court responded that the IRS's reading of the statute was not dispositive and that said the regulation appeared to misread the statute by limiting the mandatory extension time described in Code Sec. 7508A(d) by the general one-year provision mentioned in Code Sec. 7508A(a).

The government is expected to appeal the Kwong decision. The Taxpayer Advocate said that if the court's decision ultimately holds up, taxpayers who have been assessed penalties or interest for late filings or payments should be entitled to refunds of penalties or interest paid and to abatements of penalties or interest not yet paid. In addition, for cases currently in litigation, the IRS could not assess penalties or interest for the relevant years.

The Taxpayer Advocate observed that impacted taxpayers represent a broad cross-section of the public, including individuals, small business, large corporations, estates, and trusts. The issue reaches taxpayers with obligations related to income, employment, estate, gift, and excise taxes. It may also affect taxpayers who filed late international information returns (such as reports of Foreign Bank and Financial Accounts (FBARs)), which can result in significant penalties even when no tax is due.

Claims Must Be Filed by July 10, 2026

Under Code Sec, 6511(a), a refund claim generally must be filed within three years of the date the return was filed or two years from the date the tax was paid. The Taxpayer Advocate said that most taxpayers will need to file claims by July 10, 2026, using Form 843, Claim for Refund and Request for Abatement. Since this issue is still being litigated, taxpayers should also consider filing protective claims to preserve their rights.

No Code provision authorizes the filing of a protective claim. However, Internal Revenue Manual (IRM) Section 25.6.1.10.3.2.5 (7-5-2024) states that protective claims may be filed to preserve the taxpayer's right to claim a refund when the taxpayer's right to the refund is contingent on future events and may not be determinable until after the statute of limitations expires. A valid protective claim need not state a particular dollar amount or demand an immediate refund; however, the claim must identify and describe the contingencies affecting the claim; must be sufficiently clear and definite to alert the IRS as to the essential nature of the claim; and must identify a specific year or years for which a refund is sought.

Based on the IRM guidance, the Taxpayer Advocate advised that taxpayers would need to file a Form 843, write "Protective Refund Claim Pursuant to Kwong Case" or something similar across the top, and fill in as much detail as possible. Generally, taxpayers will need to file the form by July 10, 2026. Taxpayers can also file protective claims for abatement of interest and penalties assessed but not yet paid. The Taxpayer Advocates noted that the IRS typically holds protective claims for refunds in suspense until the underlying issue is resolved by the courts, and the claim can be perfected by providing the final numbers based upon the court's decision. Protective claims prevent the period of limitations from expiring while waiting for a final resolution.

The Taxpayer Advocate noted that Form 843 cannot be filed electronically, it must be submitted on paper. Paper filing is slower, less accessible, and more difficult to track. The IRS does not provide immediate confirmation that it has received the claim. Thus, the Taxpayer Advocate advised taxpayers to send their refund claims by certified mail.

The Taxpayer Advocate also advised the IRS to publicize this issue, provide an additional six-month extension to file refund claims under Code Sec. 6081, consider providing relief systemically to all eligible taxpayers, and create an electronic portal to which taxpayers may submit Kwong-related refund claims and receive acknowledgements that their claims have been received. But the Taxpayer Advocate concluded that unless the IRS or Congress acts to ensure all affected taxpayers will receive refunds if the Kwong decision is upheld, taxpayers seeking refunds for penalties and interest they paid relating to that period will, in most cases, need to file claims by July 10, 2026.

For a discussion of protective refund claims, see Parker Tax ¶261,115. For a discussion of the statute of limitations for refunds or credits of overpayments, see Parker Tax ¶261,180.

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