A major court ruling from November 2025 could mean tax refunds for millions of Americans in 2026. The decision affects people and businesses that paid IRS penalties and interest during the COVID-19 period, reported Futbolete. The case, Kwong vs United States, was decided by the United States Court of Federal Claims and is now drawing attention for its wide impact. Many taxpayers may be able to get back money they paid, but most were never told about this option. The Internal Revenue Service (IRS) is now handling a surge of potential claims. To receive a refund, eligible taxpayers must act quickly. The deadline to file a claim is July this year, and missing it could mean losing the money permanently.
HOW THE LAW CAME INTO EXISTENCE
The story begins with a law Congress passed in 2019, long before the COVID-19 pandemic. According to Futbolete, section 7508A of the Internal Revenue Code says that when the president declares a federal disaster, certain tax deadlines must be paused for the entire emergency period, plus an extra 60 days. The key point is that the law uses mandatory language, not optional. So when President Donald Trump declared a national emergency on January 20, 2020, the rule automatically took effect.
The Internal Revenue Service (IRS) did not interpret the law that way. Instead, it treated pandemic-era deadline extensions as optional relief, as reported by Futbolete, granted case by case. At the same time, it kept charging penalties for late filing and non-payment. As a result, millions of taxpayers paid fees, unaware that federal law may have protected them from those charges.
THE MAN WHO FOUGHT AGAINST IRS
Terry Kwong was the man who challenged the IRS in court after it denied his refund claims for penalties. Although he filed his lawsuit in February 2023, more than two years later, the government argued it was too late. However, the Federal court Claims ruled the pandemic paused deadlines until July 10, 2023, making his case timely and valid and ruled in his favour, reported Futbolete.
IMPACT OF NOVEMBER 2025 COURT RULING
The ruling’s impact goes far beyond one case. If deadlines were legally paused, the IRS may not have had the authority to charge penalties or interest during that period. According to Futbolete, this means anyone who paid such fees between January 20, 2020, and July 10, 2023, could qualify for a refund. Estimates suggest billions of dollars are involved. Even Western Digital filed a lawsuit in 2026 to recover millions, showing the issue is widespread, reported Futbolete.
HOW TO CLAIM YOUR TAX REFUND
To start the refund process, taxpayers should first get their tax account transcript from the IRS, which shows all payments, penalties, and interest. According to Futbolete, this can be requested online via the IRS Individual Online Account portal, by mail through IRS.gov, or by phone at 800-908-9946. According to Futbolete, after reviewing the transcript and identifying charges from the pandemic period, the next step is to file IRS Form 843, the official form for requesting refunds or penalty relief.
However, there are key things to remember. The ruling is not final and could be appealed. Also, most claims are subject to a three-year deadline, which for many taxpayers falls around July 10, 2026, according to Futbolete. Experts strongly recommend filing a claim before this date, even if an appeal is ongoing, to avoid losing the right to a refund permanently.
HOW THE LAW CAME INTO EXISTENCE
The story begins with a law Congress passed in 2019, long before the COVID-19 pandemic. According to Futbolete, section 7508A of the Internal Revenue Code says that when the president declares a federal disaster, certain tax deadlines must be paused for the entire emergency period, plus an extra 60 days. The key point is that the law uses mandatory language, not optional. So when President Donald Trump declared a national emergency on January 20, 2020, the rule automatically took effect.
The Internal Revenue Service (IRS) did not interpret the law that way. Instead, it treated pandemic-era deadline extensions as optional relief, as reported by Futbolete, granted case by case. At the same time, it kept charging penalties for late filing and non-payment. As a result, millions of taxpayers paid fees, unaware that federal law may have protected them from those charges.
THE MAN WHO FOUGHT AGAINST IRS
Terry Kwong was the man who challenged the IRS in court after it denied his refund claims for penalties. Although he filed his lawsuit in February 2023, more than two years later, the government argued it was too late. However, the Federal court Claims ruled the pandemic paused deadlines until July 10, 2023, making his case timely and valid and ruled in his favour, reported Futbolete.
IMPACT OF NOVEMBER 2025 COURT RULING
The ruling’s impact goes far beyond one case. If deadlines were legally paused, the IRS may not have had the authority to charge penalties or interest during that period. According to Futbolete, this means anyone who paid such fees between January 20, 2020, and July 10, 2023, could qualify for a refund. Estimates suggest billions of dollars are involved. Even Western Digital filed a lawsuit in 2026 to recover millions, showing the issue is widespread, reported Futbolete.
HOW TO CLAIM YOUR TAX REFUND
To start the refund process, taxpayers should first get their tax account transcript from the IRS, which shows all payments, penalties, and interest. According to Futbolete, this can be requested online via the IRS Individual Online Account portal, by mail through IRS.gov, or by phone at 800-908-9946. According to Futbolete, after reviewing the transcript and identifying charges from the pandemic period, the next step is to file IRS Form 843, the official form for requesting refunds or penalty relief.
However, there are key things to remember. The ruling is not final and could be appealed. Also, most claims are subject to a three-year deadline, which for many taxpayers falls around July 10, 2026, according to Futbolete. Experts strongly recommend filing a claim before this date, even if an appeal is ongoing, to avoid losing the right to a refund permanently.
