A recent federal court decision in the case of Kwong v. United States has opened the door for millions of Americans to reclaim money lost to improper tax penalties. The ruling establishes that the IRS incorrectly assessed certain interest and penalties during the COVID-19 pandemic era, specifically covering the period from January 20, 2020, to July 10, 2023. This window encompasses the official federal disaster period and the subsequent 60-day buffer period provided by tax regulations.

This ruling impacts a broad spectrum of taxpayers, ranging from individual filers to small businesses and major corporations. Importantly, these refunds or penalty abatements will not be issued automatically by the government. Taxpayers must take active measures to identify and claim what they are owed. To verify eligibility, individuals should examine their IRS online account transcripts for any penalties or interest charged within the contested timeframe.

Those who have already paid these penalties may be eligible for a refund, while those with unpaid balances can apply for an abatement. The process requires the submission of Form 843. Unlike many modern tax filings, this form must be submitted through the mail rather than electronically. Experts suggest using certified mail to ensure there is a verifiable record of the submission. The deadline to secure these claims is July 10, 2026.

Because the government maintains the right to appeal this judicial decision, tax professionals are advising caution. Filing a ‘protective claim’ is recommended to preserve a taxpayer’s right to a refund even if the legal landscape shifts due to future appeals. Consulting with a qualified tax professional or accountant is highly encouraged to navigate the complexities of this filing.