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IRS Penalties From COVID Years May Be Refundable: Claim Your Money Before July 2026

Author: Elite Consulting, P.C. | | Categories: 2026 Tax Changes , COVID tax penalties , CPA Insights , CPA Tips , IRS campaign , IRS Penalties , IRS penalty refund , IRS Rules 2026 , IRS Tax Changes , IRS Tax Collection , IRS Tax Refunds , IRS Tax Tips , Kwong v United States , Tax Law Changes , Tax Planning , Tax Policy Changes , Tax Reform Updates , Tax Refunds 2026

Blog by Elite Consulting, P.C.

Many taxpayers paid IRS penalties and underpayment interest during the COVID years. Now, a major court case may give some people a chance to get that money back.

Under Kwong v. United States, the court ruled that certain IRS penalties and interest charged during the COVID period may have been improperly assessed. This applies to some penalties and underpayment interest connected to the 2020, 2021, and 2022 tax years.

That means taxpayers may have an opportunity to file a claim and request a refund from the IRS.

But there is an important deadline. Claims generally must be filed by July 10, 2026.

For many individuals and business owners, this could mean recovering hundreds or even thousands of dollars.

In this article, we will explain what the case means, who may qualify, and why working with a CPA is important before filing a claim.

 

What Is Kwong v. United States?

Kwong v. United States is a court case that challenged how the IRS charged penalties and underpayment interest during the COVID period.

During the pandemic, the IRS faced major delays, office shutdowns, staffing shortages, and processing backlogs. Many taxpayers received penalty notices and interest charges even while the agency was struggling to process returns and payments on time.

The court ruling questioned whether some of those charges were legally proper during that period.

As a result, taxpayers who paid certain penalties or underpayment interest tied to the COVID years may now have grounds to request refunds.

This has quickly become an important tax topic because millions of Americans dealt with delayed filings, late notices, and confusion during the pandemic years.

 

Which Tax Years Are Affected?

The issue mainly affects the following tax years:

  • 2020
  • 2021
  • 2022

These were the years most impacted by COVID-related disruptions.

Many taxpayers experienced:

  • Delayed tax filings
  • Processing backlogs
  • Missing IRS notices
  • Payment delays
  • Amended return delays
  • Confusing tax rule changes

Because of these issues, some taxpayers ended up paying:

  • Failure-to-pay penalties
  • Underpayment interest
  • Other IRS-related charges

Now, some of those amounts may be refundable.

 

What Is Underpayment Interest?

Underpayment interest is extra money charged by the IRS when taxpayers do not pay enough taxes during the year.

For example:

  • A business owner may have underpaid estimated taxes
  • A freelancer may not have withheld enough taxes
  • An investor may have owed more taxes than expected

The IRS then charges interest on the unpaid amount.

During COVID, many taxpayers faced financial hardship and unexpected income changes, making it harder to accurately estimate taxes.

Because of the court ruling, some taxpayers may now be able to recover part of that interest.

 

Who May Qualify for a Refund?

You may qualify if you:

  • Paid IRS penalties during 2020–2022
  • Paid underpayment interest during those years
  • Received IRS notices tied to COVID-era delays
  • Had delayed returns or amended return processing
  • Experienced financial hardship related to the pandemic

Both individuals and businesses may qualify.

This includes:

  • Small business owners
  • Self-employed workers
  • Investors
  • Independent contractors
  • Retirees
  • Wage earners

Even taxpayers who already paid their balances in full may still be eligible to request refunds.

 

Why This Matters

Many taxpayers assumed penalties and interest charged by the IRS were final.

Now, this ruling may create an opportunity to recover money that should not have been charged in the first place.

For some taxpayers, the refund may be small. For others, it could be thousands of dollars.

This is especially important for:

  • Small businesses that struggled during COVID
  • Families dealing with financial hardship
  • Taxpayers who filed late because of pandemic disruptions
  • Individuals who paid large underpayment interest charges

With rising costs and economic uncertainty, getting this money back could provide meaningful financial relief.

 

The Deadline Is Very Important

Taxpayers generally have until July 10, 2026 to make a claim.

Missing the deadline could mean losing the chance to recover penalties and interest permanently.

That is why taxpayers should start reviewing their IRS records now rather than waiting until the last minute.

Gathering old notices, payment records, and tax returns can take time.

 

Why Working With a CPA Matters

This opportunity may sound simple, but IRS claims can become complicated quickly.

That is why working with a CPA is highly recommended.

A CPA can help:

  • Review your IRS records
  • Identify penalties and interest that may qualify
  • Determine if a refund claim is possible
  • Prepare proper documentation
  • File claims accurately
  • Communicate with the IRS if needed

Many taxpayers are not even aware they paid underpayment interest during those years.

A CPA can carefully analyze transcripts and notices to identify opportunities you may miss on your own.

 

Advantages of Hiring a CPA

Expert Knowledge

CPAs understand IRS procedures, tax law changes, and court rulings. They know how to properly review your tax situation.

Accuracy

Refund claims require correct forms and supporting records. Mistakes can delay processing or lead to denials.

Time Savings

Reviewing multiple years of IRS notices and payments takes time. A CPA can handle much of the work for you.

Better Financial Outcomes

A CPA may identify additional opportunities or refund claims you were not aware of.

Peace of Mind

Tax matters can feel stressful. Having a professional guide you through the process can make things much easier.

 

What You Should Do Right Now

If you think you may qualify, here are a few smart next steps:

1. Gather Your IRS Notices

Look for notices from 2020–2022 mentioning:

  • Penalties
  • Interest
  • Underpayment charges
  • Late payment fees

2. Review Past Tax Returns

Check whether you:

  • Filed late
  • Owed taxes
  • Paid estimated taxes incorrectly
  • Received penalty notices

3. Request IRS Transcripts

IRS account transcripts may show exactly what penalties and interest were charged.

4. Talk to a CPA

A CPA can help determine whether you have a valid claim before the deadline expires.

 

Final Thoughts

The Kwong v. United States ruling may create a valuable opportunity for taxpayers who paid IRS penalties or underpayment interest during the COVID years.

Many people faced serious financial and administrative challenges during 2020–2022. Now, some taxpayers may finally have a path to recover money that may have been improperly charged.

But time matters.

Claims generally must be submitted by July 10, 2026.

If you paid IRS penalties or interest during the COVID period, now is the time to review your records and speak with a trusted CPA.

You could be leaving valuable money unclaimed — and once the deadline passes, the opportunity may disappear for good.

 

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