A recent case in the Court of Federal Claims confirmed taxpayers may be entitled to refunds of interest and penalties paid during the COVID-19 pandemic if they act before a forthcoming deadline. The National Taxpayer Advocate estimates tens of millions of taxpayers may be entitled to refunds. The opportunity includes a wide variety of penalties and interest, but taxpayers must file a claim for refund by July 10, 2026.

In 2019, Congress enacted Section 7508A, which provides, during federally declared disasters, certain tax deadlines are automatically suspended for the duration of the disaster period plus 60 days. While the IRS narrowly interpreted this section, in 2024 the Tax Court, in Abdo v. Commissioner, held the postponement period is mandatory and self-executing. It invalidated IRS regulations that shortened the postponement during the pandemic. On March 13, 2020, President Trump declared a nationwide emergency in response to the COVID-19 pandemic and approved major disaster declarations for all states, identifying January 20, 2020 as the beginning of the COVID-19 disaster period. President Biden ended the disaster declarations on May 11, 2023.

In late 2025, in Kwong v. United States, the Court of Federal Claims reviewed the COVID-19 disaster timeline and held the postponement period extended to July 10, 2023 (60 days after May 11, 2023, as mandated by Section 7508A(d)). Thus, between January 20, 2020, and July 10, 2023, not only were filing deadlines postponed, but interest and penalties could not accrue, and the statute of limitations for claiming credits or refunds was suspended.

Generally, taxpayers have the later of three years from the time a return was filed or two years from the time tax was paid to file a claim for credit or refund. Because the three-year limitations period runs from July 10, 2023 (the end of the postponement period), most taxpayers must file claims by July 10, 2026.

The Kwong decision is not yet final. Kenneth Kies, an assistant secretary in the Treasury Department, stated the administration considers the case wrongly decided. The Department of Justice has informed the Court of Federal Claims it intends to appeal the decision. It may be several years before the issue is finally resolved.

Even if the ultimate resolution is favorable to taxpayers, they may lose their refund rights by waiting too long. Taxpayers should file protective claims to preserve their rights while the legal issue is resolved. Taxpayers who paid interest or penalties that accrued during the postponement period should act quickly and before July 10, 2026. Taxpayers who accrued penalties or interest during the postponement period but have not paid them may seek abatement of the penalties or interest without the July 10, 2026 deadline impacting them.

Brian C. Bernhardt is tax controversy/litigation attorney with Fox Rothschild in Greensboro.

May 27, 2026/by Jessica Junqueira