Court Ruling on COVID Disaster Relief Period Could Affect Millions of IRS Penalties, Subject to Appeal
National Taxpayer Advocate Erin M. Collins said taxpayers charged penalties and interest during the COVID-19 disaster period have until July 10 to file claims following a federal court decision that rejected the IRS's narrower interpretation. The ruling in Kwong v. United States interpreted disaster relief as covering the full 3.5-year window from January 2020 to July 2023.
cnet.comTens of millions of taxpayers may be able to receive refunds from the IRS for certain penalties and interest charged during the COVID-19 pandemic, National Taxpayer Advocate Erin M. Collins stated in a blog post. Taxpayers must file a claim by July 10 to qualify for the possible refunds.
The stakes are large. In fiscal 2022 the IRS levied more than 12 million estimated-tax penalties and over 16 million failure-to-pay penalties totaling more than $12 billion. 6 million taxpayers under a narrower 2022 relief notice.
Collins said affected taxpayers could include individuals, small businesses, large corporations, estates, and trusts. The issue could apply to income, employment, estate, gift, and excise taxes. Taxpayers who filed late international information returns may also be affected because those filings can come with large penalties even when no tax is owed.
The possible refunds stem from a ruling in Kwong v. United States. U.S. Court of Federal Claims issued the decision in November 2025. FEMA’s COVID-19 disaster incident period ran from January 20, 2020 through May 11, 2023.
Tax law added 60 days to the FEMA COVID-19 disaster incident period, extending the period to July 10, 2023 for tax purposes. In Kwong v. 5-year window from the beginning of the disaster declaration through 60 days after its end.
If that interpretation holds, many taxpayers charged late-filing or late-payment penalties or interest during the COVID period may have been penalized on returns and payments that were never actually late. U.S.
