Quick Facts
- Hard Deadline: The cutoff to file your claim is July 10, 2026.
- Legal Grounds: The refund is based on the Kwong v United States ruling regarding Section 7508A tax penalty refund eligibility.
- Eligibility Years: Tax relief targets penalties paid on 2019, 2020, and 2021 tax returns.
- Required Form: Taxpayers must use a physical IRS Form 843 for pandemic penalties per tax year.
- Claim Type: These are considered protective claims because of ongoing Department of Justice appeals.
- Impacted Penalties: Refundable amounts include failure-to-file liabilities and failure-to-pay penalties plus interest.
As the July 10 2026 deadline for Kwong tax refund claims approaches, taxpayers must act now to secure their IRS pandemic penalty refund. Following the Kwong v United States ruling, you may be entitled to recover failure-to-pay and failure-to-file penalties from the 2019, 2020, and 2021 tax years. This guide provides the exact IRS pandemic penalty refund protective claim instructions to secure your refund while the legal process unfolds.
Mission Critical: Deadlines
The window to file your claim is rapidly closing. While the IRS previously offered automatic assistance for some, the broader relief found in recent litigation requires a manual filing of Form 843. Your paperwork must be postmarked by July 10, 2026, to protect your statute of limitations. Failing to meet this date means forfeiting any potential refund of pandemic-era penalties, regardless of the court’s final decision.
The Legal Victory: Kwong v. United States and Section 7508A
The landscape of tax compliance changed significantly following the decision in Kwong v United States. For years, the Internal Revenue Service maintained strict, limited windows for pandemic-related relief. However, when the Supreme Court moved to limit administrative overreach in cases like Loper Bright, the courts began looking more closely at how the IRS interpreted statutes like Section 7508A.
Section 7508A allows for the postponement of certain tax deadlines in the event of a federally declared disaster. The court in Kwong found that the pandemic-era disaster extensions lasted longer than the IRS officially acknowledged. Specifically, the ruling suggested that the national emergency window triggered mandatory tolling of the statute of limitations under Public Law 119-64.
While the IRS provided approximately $1 billion in automatic failure-to-pay penalty relief to roughly 5 million taxpayers recently, that relief was limited. It focused on individuals with assessed taxes under $100,000 who received notices during a very specific window. The Kwong litigation opens the door for a much wider range of taxpayers—including those with higher liabilities and businesses—to claim a refund for penalties paid between early 2020 and mid-2023.
| Feature | 2022 Automatic Relief | Kwong Protective Claim |
|---|---|---|
| Eligibility | Income tax < $100k | No specific income limit |
| Years Covered | 2020, 2021 | 2019, 2020, 2021, and 2022 |
| Method | Automatic (for most) | Manual Form 843 filing |
| Status | Finalized | Pending DOJ Appeal |
| Legal Basis | Administrative Notice | Section 7508A & Kwong v. US |
Eligibility Audit: Do You Qualify for a Penalty Refund?
Determining Kwong v United States refund eligibility requires a thorough audit of your tax records. The relief generally applies to individuals, corporations, estates, and trusts who were assessed failure-to-file or failure-to-pay penalties for tax years 2019 through 2021.
It is important to note that this specific relief does not apply to FBAR (Report of Foreign Bank and Financial Accounts) penalties, as those fall under Title 31 rather than the Internal Revenue Code. To verify your eligibility, you need to pull your IRS account transcripts and look for specific transaction codes that indicate penalty assessments.
How to Identify Refundable Penalties
Review your IRS transcript for the following markers:
- TC 166: Used for identifying an estimated tax penalty.
- TC 276: Indicates failure-to-pay penalties.
- TC 160: Indicates failure-to-file penalties.
- Notice Date: Review if you received an initial balance due notice between February 5, 2022, and December 7, 2023.
A 2026 Treasury Inspector General for Tax Administration report mentioned that the IRS identified approximately 2,138 taxpayers who were mistakenly excluded from pandemic relief efforts. These taxpayers were found to be entitled to refunds totaling about $463,000. If you fall into this group, or if your transcript shows significant penalties paid during the disaster window, you are a prime candidate for an IRS pandemic penalty refund.
Filing Blueprint: Preparing IRS Form 843
Filing for an IRS pandemic penalty refund is not currently an automated process. You must file a physical, paper-based IRS Form 843 for pandemic penalties for every tax year you are claiming. Because the Department of Justice is currently appealing the Kwong case, your filing acts as a protective claim. This means you are essentially "holding your place in line" and stopping the clock on the statute of limitations.
Step-by-Step Instructions
- Obtain Form 843: Download the official current version of Form 843 (Claim for Refund and Request for Abatement) from the IRS website.
- Identification: Complete the top section with your name, SSN or EIN, and current address.
- Period Covered: Fill out Line 1 with the specific tax year (e.g., 01/01/2020 to 12/31/2020).
- Type of Tax: On Line 3, check the box for "Income."
- Reason for Claim: On Line 5a, check the box for "Interest was assessed as a result of IRS errors or delays" or "Reasonable cause," but the most critical information goes into the narrative block on Line 7.
Copy-Paste Narrative for Line 7
When explaining how to file IRS Form 843 for pandemic penalties, the legal citations are mandatory. Use the following text for Line 7 to ensure your claim is categorized correctly by IRS agents:
Protective Refund Claim Pursuant to Kwong v. United States. Taxpayer requests a refund and abatement of all failure-to-file and failure-to-pay penalties, including associated interest, for the tax year indicated above. This claim is based on the interpretation of Section 7508A and Public Law 119-64 as established in Kwong v. United States, which extends the disaster relief period for the COVID-19 pandemic. This is a protective claim to preserve the taxpayer's rights under the statute of limitations pending the final resolution of the Kwong litigation.
Documentation Requirements
Beyond the form itself, your documentation required for IRS pandemic penalty refund claim filings should include:
- A copy of the relevant IRS account transcript showing the penalties paid.
- Evidence of payment (cleared checks or bank statements).
- Certified mail tracking records to prove the filing date.
Deadlines and What to Expect After Filing
The primary timeline to watch is the July 10 2026 deadline for Kwong tax refund claims. Because the statute of limitations for 2019-2021 tax years would normally have expired or be expiring soon, this protective claim is the only way to ensure you remain eligible for the funds if the Kwong ruling is upheld.
Once you mail your Form 843, expect a standard processing window of three to six months for an initial response. However, because this is a protective claim tied to active litigation, the IRS may issue a "suspense" letter. This letter essentially states that the IRS is holding your claim until the legal challenge by the Department of Justice is resolved.
Do not be discouraged by a lack of immediate payment. The goal of filing now is statute of limitations tolling. By establishing your claim before the July 10, 2026, cutoff, you prevent the government from arguing that you waited too long to ask for your money back.
FAQ
Who is eligible for the IRS pandemic penalty relief?
Eligibility generally extends to individuals, businesses, and estates that filed 2019, 2020, or 2021 returns and paid penalties for late filing or late payment. According to the IRS, to be eligible for the automatic pandemic penalty relief portion, taxpayers must have had an assessed income tax of less than $100,000 for the 2020 or 2021 tax years and received an initial balance due notice between February 5, 2022, and December 7, 2023. However, the Kwong v United States ruling may expand this to those who do not meet these specific automatic criteria.
How do I apply for an IRS penalty refund?
You must file a physical IRS Form 843 for each tax year you are claiming. The form should clearly state that it is a protective claim based on the Kwong v United States ruling and Section 7508A. This form must be mailed to the IRS service center where you would normally file a paper return.
Is there a deadline to claim pandemic tax relief?
Yes, the deadline to file a protective claim based on the Kwong ruling and the extended disaster window is July 10, 2026. Filing after this date may result in your claim being rejected due to the expiration of the statute of limitations.
Do businesses qualify for the IRS penalty waiver?
Yes, businesses are eligible for the IRS pandemic penalty refund. Unlike the initial automatic relief which had specific income thresholds, the legal precedent in Kwong regarding disaster-era extensions applies to various entity types, including corporations and partnerships that faced failure-to-pay penalties during the national emergency window.
What if I already paid the penalties for those tax years?
If you have already paid the penalties, you are the primary candidate for an IRS pandemic penalty refund. The purpose of Form 843 in this context is to request that those previously paid funds be returned to you. Make sure to include proof of payment and your IRS transcript showing the transaction codes for the penalties in your submission.
