Millions Could Miss Out On IRS Refunds From Pandemic Era — What Should You Do Before July 10 Deadline

Taxpayers may still reclaim pandemic-era penalties, yet a little-known July cutoff could shut the door. There is a quiet race under way in the US tax system. It is not being advertised. It is not widely understood. Yet it could decide whether millions of people recover money they never should have paid.

At the centre of it lies a court ruling, a disputed interpretation of law, and a deadline that is now only days away. The warning comes from Erin Collins, the US National Taxpayer Advocate, who has raised concerns that ordinary taxpayers may miss out while better-advised claimants move quickly.

A Pandemic Rule With Lasting Consequences

The issue traces back to the pandemic. In November 2025, a US court ruling in Kwong v. The United States challenged how the Internal Revenue Service applied penalties during Covid-19. The judgement centred on a provision in the tax code that pauses deadlines during a national disaster. Covid-19 was declared such a disaster from January 2020 until May 2023. With an additional 60-day buffer, the pause effectively extended to July 2023.

The court found that deadlines during this entire period should have been suspended. That interpretation carries major implications. If deadlines were paused, then many filings and payments were not late. If they were not late, penalties and interest should not have been charged.

A separate ruling in Abdo v. Commissioner reached a similar conclusion, strengthening the legal argument. The IRS does not agree. It maintains that the rule requires a clear end date to apply automatically. The US Department of Justice is expected to appeal.

Who Could Be Owed Money

The potential scope is vast. According to Collins, the affected group includes individuals, small businesses, large corporations, estates and trusts. Penalties that may now be open to challenge include failure-to-file and failure-to-pay charges, estimated tax penalties, and interest applied during the pandemic window.

The sums vary. Some individuals may be owed a few hundred dollars. Others, especially business owners dealing with payroll or international filings, could be looking at far larger amounts.

The scale becomes clearer when set against IRS data. In the 2022 fiscal year alone, the agency issued more than 12 million estimated tax penalties and over 16 million failure-to-pay penalties, totalling more than $12 billion.

While the IRS has already refunded about $1.2 billion under earlier relief measures, the reach of the Kwong ruling is potentially much wider.

A Deadline Few Know About

Despite the stakes, awareness remains low. Claims must be filed by 10 July 2026. There is no online system. Applications must be submitted on paper. Collins has warned that this creates a divide. Those with legal or tax advisers are more likely to act in time. Others may not even realise they are eligible.

'My overriding goal is to get the word out to as many taxpayers as possible and to avoid disparate results between the "well advised" and the "unaware",' Collins said.

Her stated aim is to prevent what she describes as unequal outcomes between the well-advised and the unaware. She has urged the IRS to extend the deadline, improve communication, and introduce an electronic filing option. None of those changes have yet been confirmed.

What Taxpayers Must Do Now

The process begins with checking records. Taxpayers can review their IRS account transcripts to identify penalties or interest charged between January 2020 and July 2023. If such charges appear, they may fall within the scope of the ruling.

To claim a refund, individuals must file Form 843. This is a paper form used to request refunds or abatements. Because there is no electronic option and no automatic confirmation, Collins recommends sending it by certified mail.

For those unsure of the exact amount, there is an alternative. A protective claim allows taxpayers to secure their position without specifying a final figure. The form must clearly reference the Kwong case and the relevant tax years. These claims are typically held until the courts reach a final decision.

Uncertainty Over the Outcome

Filing a claim does not guarantee a payout. The legal process is far from settled. An appeal could take a year or longer. The case may even reach the US Supreme Court. If the government prevails, claims could be denied. If the ruling stands, refunds may follow.

Large corporations have already begun to act. Companies such as Western Digital and Meta have invoked the Kwong decision in their disputes with the IRS. For individuals, the decision is more personal. Filing requires time and care. Errors on Form 843 can delay or invalidate claims. Yet the alternative is clear. Missing the deadline closes the door entirely.

Tax disputes rarely capture public attention. They unfold slowly and often quietly. But this case carries a rare immediacy. Millions may be owed money. The legal basis is contested but credible. The deadline is fixed. For now, the burden rests on taxpayers. Identify the charges. File the claim. Wait for the courts. In a system as vast as the US tax code, opportunities like this do not come often. When they do, they tend not to last.