COVID-Era IRS Penalty Refund Claims: What to Expect If You File in 2026

Many taxpayers are now hearing about possible IRS penalty refunds connected to the COVID years.

People who paid IRS penalties or underpayment interest during 2020 through 2022 may still have a chance to recover money under legal interpretations tied to Kwong v. United States and other pandemic-related IRS issues.

But after learning about this opportunity, most people ask the same question:

“What happens if I actually file a claim?”

The answer depends on your tax history, the type of penalties involved, and how the IRS reviews your account. While every case is different, there are several common things taxpayers should expect during the process.

If you are thinking about filing a COVID-era IRS penalty refund claim, this guide will help you understand the next steps, possible timelines, and why professional guidance can make a big difference.

First, Understand That This Is Not an Instant Refund

One of the biggest misunderstandings is thinking that filing a claim means an automatic payment is coming right away.

That is not how the process works.

The IRS will usually:

Review your account
Check payment history
Examine penalties and interest charged
Verify eligibility
Request additional information if needed

This process can take time, especially since IRS systems are still dealing with backlogs from previous years.

You May Need IRS Transcripts

One of the first things tax professionals usually request is an IRS account transcript.

This document shows:

Penalties charged
Interest added
Filing dates
Payment records
Account adjustments

Many taxpayers are surprised by how much information appears in these transcripts.

Without transcripts, it can be difficult to determine whether you may actually qualify for relief.

The IRS May Request Additional Documentation

In some situations, the IRS may ask for:

Prior tax returns
Payment records
Proof of hardship
Business records
Supporting explanations

This is why organization is important.

Taxpayers who keep clear records often have a smoother process than those searching for old paperwork at the last minute.

Processing May Take Several Months

Patience is important during any IRS-related matter.

Even simple requests can take time because:

The IRS handles millions of filings
Older accounts require additional review
COVID-era cases may involve manual processing

Some taxpayers may receive updates quickly, while others may wait several months depending on complexity.

Not Every Claim Will Be Approved

This is another important point.

Some taxpayers hear about the opportunity and assume everyone qualifies.

That is not true.

Approval depends on several factors, including:

The type of penalty charged
Timing of payments
IRS relief rules
Account history
Supporting documentation

Some claims may qualify fully, partially, or not at all.

You Could Receive a Partial Refund

In some cases, taxpayers may not recover the entire amount paid.

Instead, the IRS may:

Refund only certain penalties
Reduce interest charges
Approve adjustments for specific periods only

Every case is unique.

Even partial relief, however, can still help taxpayers recover meaningful amounts of money.

Small Business Owners May See Larger Claims

Business owners were heavily affected during the pandemic.

Many dealt with:

Delayed revenue
Payroll struggles
Supply chain problems
Unexpected shutdowns

Because of these disruptions, business taxpayers often faced larger penalties and underpayment interest charges.

As a result, some small businesses may have larger refund opportunities worth reviewing carefully.

Self-Employed Taxpayers Should Also Pay Attention

Freelancers and independent contractors often struggled with estimated tax payments during COVID.

Income changed quickly for many workers, making it harder to estimate quarterly payments accurately.

This created:

Underpayment penalties
Late payment interest
IRS notices and balances

Now, some of those taxpayers may still have options to request review or possible relief.

You May Receive IRS Notices During the Process

It is normal to receive IRS letters while a claim is being reviewed.

These notices may:

Confirm receipt of your request
Ask for more information
Explain processing delays
Request clarification

Do not panic if you receive additional mail from the IRS.

Many notices are simply part of the review process.

Why Working With a CPA Helps

COVID-era penalty claims can become confusing quickly.

A CPA can help:

Interpret IRS transcripts
Identify eligible penalties
Prepare documentation correctly
Respond to IRS notices
Avoid filing mistakes

Many taxpayers feel overwhelmed trying to handle IRS issues alone.

Having professional guidance often reduces stress and improves accuracy.

Common Mistakes Taxpayers Should Avoid

Here are several mistakes tax professionals are warning people about:

Waiting Too Long

The expected claim window may remain open until around July 10, 2026, but waiting creates unnecessary risk.

Assuming Eligibility

Not all penalties qualify for relief.

Ignoring IRS Mail

Some taxpayers miss important notices because they delay opening IRS letters.

Filing Incomplete Requests

Missing information can delay processing or lead to denial.

Trusting Online Rumors

Not everything shared online about COVID-era refunds is accurate.

Always verify information with a trusted CPA or tax professional.

What a Smart Next Step Looks Like

If you think you may qualify, a smart action plan includes:

Reviewing your 2020–2022 tax years
Gathering IRS notices
Requesting transcripts
Organizing payment records
Consulting a CPA for review
Filing before deadlines become crowded

Starting early gives you more flexibility and less stress.

Why This Opportunity Matters

For many taxpayers, the COVID years created financial hardship and confusion.

Some people paid penalties simply to move on without realizing they might later have options for review or relief.

Now, this opportunity is encouraging taxpayers to revisit old accounts and determine whether money may still be recoverable.

Even if you are unsure whether you qualify, reviewing your records now could help you avoid missing an important opportunity later.

Final Thoughts

COVID-era IRS penalty refund claims continue to gain attention as taxpayers learn more about possible relief connected to 2020–2022 tax years.

Filing a claim does not guarantee a refund, but it may open the door to recovering penalties or interest that were improperly assessed during an extremely unusual period in IRS history.

The key is understanding what to expect:

The process may take time
Documentation matters
IRS reviews can vary
Professional guidance can help

Most importantly, taxpayers should not wait until the last minute.

Reviewing your records now may help you make a more informed decision before the expected 2026 deadline window closes.