Millions Could Get an IRS Tax Refund of Pandemic Penalties: Who Qualifies?

Some taxpayers may still be able to claim pandemic-era penalties and interest. But eligibility is limited and timing matters. When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Delivered dailyKiplinger TodayProfit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. 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And, of course, most tax relief comes with deadlines.So, the question is, are you eligible, and if so, what should you do to claim your money? Here's more of what you need to know.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.Let's start with a little background. When COVID hit, the federal government declared a national emergency that ran from January 20, 2020, through May 11, 2023.During that time, the IRS used its disaster authority under Section 7508A of the U.S. Code to push back various filing and payment deadlines, including due dates for 2019, 2020, and 2021 federal income tax returns.So what? Well, a recent case in the U.S. Court of Federal Claims, Kwong v. United States, is now testing how those pandemic extensions should be applied.In that case, the court sided with a taxpayer’s argument that some pandemic-era tax deadlines may have lasted longer than the IRS treated them. That means potentially into mid-2023, including an extra 60 days after the national emergency ended.If that ruling ultimately holds, it could mean the IRS charged some penalties and interest too early, opening the door for refund claims.Despite the big numbers being thrown around, not everyone who paid a fee to the IRS during the pandemic would be in line for a refund. The focus is generally on individuals and businesses that:If you were under an IRS audit, set up a payment plan with the tax agency, or had other collection activity during that period, some of the penalties embedded in those balances could also be in play.For people with large balances or multiple years at issue, the potential refunds could reportedly be sizable. But keep in mind, this situation is in flux and will ultimately depend on how the litigation plays out.It's important to note that this situation is separate from the automatic penalty relief the IRS already rolled out for certain 2019–2021 returns.As Kiplinger reported, in that earlier program, the IRS waived or refunded specific penalties for eligible taxpayers and issued credits and refunds on its own. (Eligible taxpayers didn't have to file special paperwork.)This legal situation is also different from recent announcements about 2022 tax returns and refunds.Essentially, the IRS is warning that millions who haven't filed their 2022 returns risk missing out on $1.2 billion in unclaimed tax refunds, including overpaid taxes and tax credits like the Earned Income Tax Credit (EITC). The deadline for those who did not file returns back in 2022 is April 15, 2026.Tax refund claims come with strict time limits, usually based on when a return was filed or when the tax was paid. Because these penalties and interest date back to the pandemic years, some windows on 2020 and 2021 liabilities could start closing as soon as 2026.As a result, some practitioners are treating mid‑2026 (i.e., July 10, 2026) as a practical "deadline" for many potential claims under this development.There’s another catch. It wouldn't be surprising if the IRS contests the court’s reading of Section 7508A through an appeal. So, refunds under the Kwong legal theory aren't guaranteed.If you’re wondering whether you’re one of the “millions” being talked about, the best place to start is your own IRS account history. You can:Even if the court ultimately narrows who qualifies, this situation underscores how much timing matters in the U.S. tax system.And for those who struggled through the pandemic and then paid extra for missed shifting deadlines, this might be a rare chance to get some of that money back.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.