COVID penalty refunds after Kwong: What US expats should know

A COVID penalty refund is an informal term for refund or abatement claims involving certain IRS penalties and interest assessed during the COVID disaster period. Following the 2025 Kwong v. United States decision, some Americans abroad may need to file Form 843 by July 10, 2026, to preserve potential claims tied to older IRS penalties and interest.

The issue gained attention after many expats experienced filing delays, international mail disruptions, and unresolved IRS notices during the pandemic years. Still, refunds are not automatic, and the legal scope of relief remains uncertain.

The National Taxpayer Advocate has warned that taxpayers considering potential COVID-era refund claims may need to act before the deadline, as the IRS’s final position continues to evolve.

Published on May 22, 2026

Written by Darryl Albuquerque, EA

Darryl Albuquerque, an IRS Enrolled Agent with 22 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. Darryl also specializes in helping clients through the Streamlined Tax Amnesty Program. *Schedule a consultation with Darryl today.

Book your private consultation with Darryl

*30-minutes US$347.

Key Takeaways:

COVID penalty refunds are not automatic

Form 843 is commonly used for penalty refund or abatement requests

July 10, 2026, is an important protective-claim date in most cases

Some international penalties remain legally uncertain

Americans abroad may benefit from individualized review before filing claims

What is a COVID penalty refund?

A COVID penalty refund generally refers to a taxpayer’s request to recover certain IRS penalties or related interest that may be legally challengeable during the COVID disaster postponement period.

In practical terms, the current debate centers on whether some filing and payment deadlines remained suspended longer than many taxpayers originally believed. That matters because many Americans abroad dealt with unusual compliance problems during the pandemic, including delayed international mail, restricted travel, postponed document processing, and difficulty accessing tax professionals.

As a result, some taxpayers are revisiting older IRS penalties that previously appeared closed or time-barred.

Why are taxpayers discussing COVID penalty refunds now?

Taxpayers are discussing COVID penalty refunds because the Kwong decision suggested that certain filing and payment deadlines may have been postponed during the COVID disaster period, which could affect whether related penalties and interest were validly assessed.

Under the interpretation currently being debated, some tax deadlines may have remained suspended through July 10, 2023, because the disaster postponement period may have included an additional 60 days after the formal end of the COVID emergency period.

The timeline below helps explain why the July 10, 2026, date has become such a major focus among tax professionals.

Key dates related to the Kwong COVID refund issue

Date	Event
January 20, 2020	Beginning of the COVID disaster period discussed in the case
May 11, 2023	Official end of the COVID public health emergency
July 10, 2023	Potential end of postponed tax deadlines under the disputed interpretation
2025	Kwong v. United States gains national attention
July 10, 2026	Protective-claim date that many practitioners are monitoring in mose cases

Note: Some tax professionals are encouraging taxpayers to file protective refund claims before July 10, 2026 while the legal questions surrounding Kwong continue evolving. Others believe the IRS or courts could still narrow the scope of relief later on.

Can Americans abroad qualify for a COVID penalty refund?

Yes, some Americans abroad may potentially qualify if IRS penalties or related interest were assessed during the COVID disaster period and the Kwong interpretation applies to their facts. This issue may affect expats more than many domestic-focused articles suggest.

This issue may be especially relevant for Americans abroad who paid IRS penalties tied to 2020-2023 tax issues, filed US taxes late during the pandemic years, received IRS notices late while living overseas, or faced Form 5471, Form 8938, or similar international penalties.

As a result, some expats accumulated penalties tied to late filings, missed payments, estimated tax issues, or unresolved international reporting requirements during and after the pandemic.

Some taxpayers may therefore want to revisit failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, interest charges, and certain international information return penalties. However, eligibility depends heavily on the facts behind each penalty assessment.

Need help with US taxes abroad? Contact our team today.

Book a free consultation

Request a quote

Which IRS penalties may be reviewed for a COVID penalty refund?

Some IRS penalties may qualify for review after Kwong, although the legal treatment varies by penalty type. Certain penalties appear more likely to be discussed than others, especially those tied directly to filing and payment deadlines. The comparison below shows where the current legal discussion is largely focused.

IRS penalties currently being discussed after Kwong

Penalty type	Current status	Expat relevance
Failure-to-file penalties	Potentially affected	Common among late expat filers
Failure-to-pay penalties	Potentially affected	Depends on payment timing
Estimated tax penalties	Possibly affected	May apply where estimated payments were missed
Interest tied to penalties	Possibly affected	Often linked to disputed deadlines
Accuracy-related penalties	Likely outside the main discussion	Not a primary focus of current relief discussions
Form 8938 penalties	Requires separate analysis	International reporting issue
Form 5471 penalties	Legally uncertain	Common for expat business owners
Form 3520 penalties	Legally uncertain	Foreign trust reporting issue
FBAR penalties	Highly uncertain	Separate legal reporting regime

Important: Some online discussions suggest all COVID-era IRS penalties qualify for refunds after Kwong. The reality is less certain, and several legal questions remain unresolved.

Does Kwong apply to FBAR penalties?

Possibly, but the legal situation is much less clear for FBAR penalties.

FBAR penalties fall under Title 31 rather than the Internal Revenue Code itself. Because of that, some tax professionals believe the legal reasoning behind Kwong may not automatically apply to FBAR cases in the same way it may apply to ordinary IRS tax penalties.

At the moment, there is no broad consensus on whether the COVID disaster postponement rules extend FBAR refund claim deadlines. That uncertainty is one reason individualized analysis remains important.

What if you already used the Streamlined Filing Procedures?

Using the Streamlined Filing Compliance Procedures does not automatically prevent someone from reviewing possible COVID penalty refund opportunities. However, the interaction can become complicated.

Some expats resolved penalties through streamlined filings, paid penalties before entering compliance, corrected international reporting years ago, or previously settled offshore disclosure issues.

In these situations, the filing history and timing of the penalties may significantly affect the analysis. This is one area where generalized internet advice can become misleading very quickly.

How can Americans abroad claim a COVID penalty refund?

Many taxpayers considering a COVID penalty refund are reviewing Form 843, which the IRS commonly uses for certain refund or abatement requests involving penalties and interest. The process is still evolving, but the general approach usually follows several basic steps.

To simplify the process, the walkthrough below outlines the common starting points that taxpayers are reviewing.

Step-by-step starting point for reviewing a possible COVID penalty refund claim:

Step 1. Identify the penalty

Review IRS notices, transcripts, and prior filings to determine:

the type of penalty
assessment dates
payment dates
amounts paid
related tax years

Step 2. Gather supporting records

Americans abroad may want to gather IRS notices, account transcripts, proof of payment, prior tax returns, mailing records, and a draft Form 843 with supporting explanations before preparing a claim.

Taxpayers may also want to confirm when the penalty was assessed, when it was paid, which tax years were involved, and whether international forms triggered the penalty.

Step 3. Prepare Form 843

Taxpayers generally explain:

the penalty involved
the refund amount requested
why the claim is being filed
how the COVID disaster postponement issue may apply
whether the filing is intended as a protective claim while legal questions continue evolving

Some professionals are filing these as protective refund claims while the legal issues continue developing.

Step 4. Monitor the timing carefully

Many practitioners are currently treating July 10, 2026, as an important date for preserving potential claims in many cases connected to the COVID disaster period. That does not guarantee approval. It may simply help preserve procedural rights while the broader legal issues continue to evolve.

What are the biggest limitations taxpayers should understand?

The legal situation is still developing, and not every refund claim will succeed. That point sometimes gets lost in simplified online discussions.

Several major questions remain unresolved, including how broadly the IRS will interpret Kwong, whether courts may narrow the decision, which penalties are actually covered, whether some claims remain time-barred, and how international penalties may ultimately be treated.

COVID penalty refund claims are not guaranteed, and some areas, including FBAR penalties, remain legally uncertain. Payment dates and filing deadlines may also affect whether a claim is still open.