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If you were charged penalties or interest on your taxes during pandemic years (when the U.S. was still operating under a national emergency), you may get some relief from a recent federal court ruling. In November 2025, a federal court ruled that underpayment interest should have been postponed throughout the pandemic's federal disaster period, instead of being limited to one year.
The Kwong vs. United States ruling means you may be eligible for refunds from the IRS, which could help put extra cash in your pocket at a time when every dollar counts. That said, the deadline for filing many claims related to penalties or fees was July 10, 2026.
If you missed the deadline, don't worry. The U.S. filed an appeal in May, so the case is still ongoing. Plus, specific deadlines depend on the type of claim you're filing.
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A court ruling could change how pandemic penalties were applied
A federal court recently ruled in Kwong v. United States that the IRS was required to extend tax deadlines for the full duration of the federally declared COVID-19 disaster period under IRS Section 7508A(d). That period ran from January 20, 2020, through May 11, 2023, plus an additional 60 days, effectively pushing deadlines to July 10, 2023, as outlined in federal law at 26 U.S. Code § 7508A.
Because the IRS did not fully apply that extended timeline, the court found that penalties and interest may have been improperly charged during those years. This ultimately means that the agency may have lacked the authority to impose certain charges within that window.
The ruling has already prompted high-profile refund claims; a separate lawsuit from Western Digital is seeking a refund of more than $20 million tied to interest, though the case is still ongoing.
Millions of taxpayers may qualify for a refund
Eligibility is broader than many people might expect, covering both individuals and businesses that paid IRS penalties or interest between January 20, 2020, and July 10, 2023. This includes common situations such as late payment penalties, underpayment interest, or other charges tied to delayed filings or failure-to-pay.
Even taxpayers who eventually paid their balances in full could still qualify if any portion of that payment included penalties or interest assessed during the affected period. That means retirees, small business owners, and self-employed workers could all be impacted depending on their filing history.
The deadline to act could be closer than it seems
Although the ruling creates a potential refund opportunity, the window to claim that money is limited by standard IRS rules. In most cases, taxpayers have three years from the date a return was filed or two years from the date the tax was paid, whichever is later, to request a credit or refund.
Because the extended pandemic deadline effectively ended on July 10, 2023, that put a key cutoff around July 10, 2026 for many claims. However, the deadlines can vary based on the specific type of claim you hope to file.
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How to check your records and file a claim
The first step is confirming whether you paid penalties or interest during the eligible window. You can review your IRS tax transcripts online using the official get a transcript tool or request them by mail by calling 800-908-9946.
If you identify qualifying charges, you can file a refund request using IRS Form 843, which is designed for claiming refunds of penalties and interest. Because the rules and timing can be complex, working with a tax professional can help ensure your claim is accurate and supported with the right documentation.
Bottom line
A little-known court decision could allow millions of Americans to recover penalties and interest they paid during the pandemic, but the opportunity may not last forever. Reviewing your records now and understanding your eligibility could make a meaningful difference to your overall financial fitness.
Even a modest refund could help lower your financial stress, especially if you're managing fixed income or rising expenses in retirement. Taking action early and confirming your eligibility with a professional can help you access a refund that you're entitled to.
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