COVID-Era IRS Penalty Refunds: The Kwong Case After July 10, 2026

July 10, 2026 was widely reported as the last day to claim refunds of COVID-era IRS penalties and interest. The date came from a single court case that is now on appeal, and it has passed. Here's where it came from, what the IRS already fixed on its own, and what you can still do.

Where July 10, 2026 Came From

In Kwong v. United States, the Court of Federal Claims held that the COVID-19 national disaster declaration postponed federal tax deadlines under section 7508A(d) from January 20, 2020 through July 10, 2023. If that holding stands, refund claims for penalties and interest tied to that period stay open longer than the normal rules allow, and July 10, 2026 was the last day to file a protective claim under that reading.

The government appealed to the Federal Circuit. Its opening brief, filed September 16, 2026, argues the postponement ended no later than March 20, 2020. There's no appellate decision yet, and the IRS disagrees with the Kwong reading.

If you filed a protective claim by July 10, 2026, keep your filing proof and watch for IRS letters. A claim disallowance notice starts a two-year window to sue for a refund. If you didn't file, the Kwong route has likely closed for you, but the normal refund window can still be open for particular payments. That window is generally three years from filing the return or two years from paying the tax, whichever ends later.

What The IRS Relief Covered

Separate from Kwong, the IRS automatically removed certain failure-to-pay penalties on 2020 and 2021 returns with less than $100,000 of assessed tax, for the period when it paused collection notices. Most people who qualified saw it posted to their account in early 2024 without asking.

Why A Refund May Not Be Automatic

For many eligible taxpayers, the IRS handled the relief automatically by removing qualifying penalties from the account. If a taxpayer already paid an amount that was later covered, the account may show a credit or refund activity. But “penalty relief” does not mean every payment is refundable, and an IRS notice may contain more than one tax, penalty, or interest item.

Read the notice line by line. Confirm the tax year, form, notice date, penalty code, and amount. A payment may have been applied to tax first, while a remaining balance can continue to generate interest. The IRS account transcript and payment history are often more reliable than a short summary in a letter.

How To Check Your IRS Account

Start with an IRS Online Account if the taxpayer can access one. Review the account transcript, balance details, payment history, and notices for the relevant year. Compare those records with the filed return and bank or tax-preparer records. Keep copies of notices and document the date of every phone call or written request.

If the account does not reflect expected relief, contact the IRS using the number on the notice or follow the instructions for a written response. Ask what penalty period was assessed and whether the account was included in the automatic relief. Do not send a duplicate payment or file an amended return solely because a notice is confusing.

Other Penalty Relief Paths

A taxpayer who is not covered by the automatic program may still have another option. First-time abatement can apply when the taxpayer has a clean compliance history and meets the IRS requirements. Reasonable-cause relief may be available when circumstances such as serious illness, a natural disaster, or other events prevented timely compliance and the taxpayer acted responsibly.

These requests are fact-specific. A taxpayer should explain what happened, when it happened, how it affected filing or payment, and what steps were taken to comply. Supporting records matter. Interest generally continues to accrue on an unpaid tax balance even when a penalty request is pending.

When Professional Review Helps

A professional review can help separate tax, penalty, interest, and payment issues and identify the correct request. Bring the notices, account transcripts, filed returns, payment confirmations, and prior correspondence. A CPA can also check whether a refund-claim deadline is approaching without promising that the IRS will approve the claim.

For a California taxpayer, remember that federal IRS relief does not automatically change a California Franchise Tax Board balance or penalty. State notices require a separate review.

The practical next step is simple: verify the account, identify the exact penalty, and confirm the deadline that applies to that taxpayer. LaviCPA can help review the records and explain the available options before a response is sent.