Protect Your Potential COVID-19 Disaster Relief Refunds By Filing Formal or Protective Claims for Refund (Part III) – Image for illustrative purposes only (Image credits: Pexels)
Millions of people who paid penalties and interest on taxes during the COVID-19 federal disaster period now face a hard deadline to protect any potential refunds. Recent court developments have raised the possibility that some of those charges were not properly assessed, yet the money will not return automatically. Without action, many taxpayers could forfeit amounts they overpaid simply because they missed the window to ask for it back. The cutoff for most claims falls on July 10, 2026, leaving limited time to review accounts and submit the right paperwork.
Why the Deadline Carries Real Consequences for Everyday Taxpayers
The U.S. Court of Federal Claims decision in Kwong v. United States opened the door for refunds or abatements of certain penalties and interest tied to the nearly three-and-a-half-year disaster period that ran from January 20, 2020, through May 11, 2023, plus an extra 60 days. Under that reasoning, many filing and payment deadlines shifted, which could mean the IRS should not have charged penalties on returns for tax years 2019 through 2022. Taxpayers who already paid those amounts have until the later of three years from the adjusted due date or two years from the date of payment to file a claim.
Consider one concrete case: A taxpayer filed a 2021 return on August 30, 2022, and paid the tax in full at that time. The IRS later assessed failure-to-file and failure-to-pay penalties plus interest because it treated the return as late. The taxpayer paid those penalties on October 1, 2022. Under the Kwong reasoning, the return was actually due July 10, 2023, so the penalties should not have applied. That person now has until July 10, 2026, to seek a refund, which is later than the two-year mark from payment. If payment had occurred later, say in July 2025, the two-year clock would extend the deadline to July 2027 instead.
Formal Claims Versus Protective Claims: Choosing the Right Approach
Taxpayers must decide whether to file a formal claim for refund or abatement or a protective claim. A formal claim works when the exact amount owed back can be calculated at the time of filing. It also creates a clear path for court review if the IRS does not respond within six months. A protective claim, by contrast, preserves rights when the final amount or eligibility depends on future court rulings or IRS guidance. These claims are typically held until the underlying legal issue is settled, which can take years.
The distinction matters because formal claims trigger specific timelines for lawsuits, while protective claims focus on keeping the door open without requiring an immediate calculation. In either situation, filing on time outweighs perfect detail, since additional information can be added later but a missed deadline cannot be fixed.
How to Submit a Claim and What the IRS Requires
Most individuals seeking refunds of penalties and interest without changing their underlying tax liability should use Form 843, Claim for Refund and Request for Abatement. The form must list the specific tax years, the amounts involved, and a clear explanation that the request stems from the COVID-19 disaster relief period and the Kwong decision. Separate forms are generally needed for each tax year and type of tax.
For a protective claim, the IRS requires a written, signed document that includes the taxpayer’s name, address, Social Security number or other identification, contact details, a description of the legal issue, and the affected years. Writing “Protective Refund Claim Pursuant to Kwong Case” across the top helps flag the submission. Claims should be mailed to the IRS service center that handles the taxpayer’s current-year return. Supporting documents such as tax transcripts and copies of IRS notices strengthen the filing, though they are not always mandatory at the outset.
Common Errors That Can Erase Refund Opportunities
Taxpayers frequently lose out because of avoidable mistakes. Missing the July 10, 2026, deadline is the most direct way to forfeit rights under the three-year or two-year rules. Submitting a vague claim that fails to identify the Kwong issue, the specific years, or the reason for the protective filing often leads to rejection. Sending the form to the wrong address or combining multiple unrelated years on a single Form 843 can also create delays or denials. Finally, lacking proof of mailing leaves taxpayers without evidence that the claim was submitted on time.
Key steps to protect potential refunds include reviewing tax transcripts for penalty assessments, calculating deadlines based on payment dates, preparing Form 843 with clear references to the disaster period, and mailing claims via certified mail with return receipt.
Filing a claim now keeps options open while the courts continue to address the broader questions raised by Kwong. For many households, the amounts involved represent real money that could ease ongoing financial pressures, yet only those who act before the deadline will have any chance to recover it.
