The Internal Revenue Service has established a critical deadline this Friday for certain pandemic-era penalty relief, creating a surge of off-season work for tax preparation companies. The agency announced that taxpayers with an IRS Online Account can now electronically file Form 843 to seek refunds of fully paid interest and penalties related to the Kwong v. United States case, though businesses and others must still submit paper claims.
The deadline is drawing widespread attention because it affects a large group of taxpayers, primarily ordinary individuals rather than corporate tax departments. The National Taxpayer Advocate, Erin Collins, has noted that tens of millions of taxpayers incurred penalties or interest during the 3.5-year period in question. Notably, approximately 84% of those who paid assessed interest or penalties in the last two years reported adjusted gross income under $100,000.
The claims stem from the Kwong ruling by the U.S. Court of Federal Claims, which determined that COVID-19 disaster relief measures extended certain tax filing and payment deadlines from January 20, 2020, through May 11, 2023, plus an additional 60 days. That extension pushed the deadline to July 10, 2023. Since taxpayers generally have three years from filing or two years from payment to claim a refund, many now face a July 10, 2026, deadline to submit their claims.
Complex Process and Limited Automation
Collins warned that the relief “will not happen automatically,” cautioning that the process could create a divide between “well advised” taxpayers and those “unaware.” Filing a protective claim preserves the option for a refund during ongoing litigation but does not guarantee repayment. However, it stops the deadline from expiring. The IRS currently lacks a standardized process to handle a wave of Kwong-related filings, and the Justice Department has filed a notice of appeal, meaning the outcome remains uncertain.
There are three main filing routes: electronic Form 843 for individuals with active IRS online accounts seeking refunds of already-paid penalties and interest; paper Form 843 for businesses, filers without online accounts, or complex claims; and original or amended returns for taxpayers pursuing missed credits, unpaid withholding, or other adjustments. The electronic option is designed to reduce the need for professional help on simple claims, while paper and amended returns are more labor-intensive and likely to drive business to tax professionals.
Impact on Tax-Prep Companies
H&R Block Inc. (NYSE: HRB) and Intuit Inc. (NASDAQ: INTU) are the two major publicly traded companies most exposed to U.S. consumer tax preparation. H&R Block reported a 5.3% increase in third-quarter revenue, citing higher average fees and greater volume in its assisted tax segment. Intuit saw TurboTax revenue rise 7% to $4.4 billion in its April quarter and set TurboTax Live revenue guidance at $2.8 billion for the year.
Both firms have been building out their assisted tax businesses. H&R Block CEO Curtis Campbell noted that customers seek “confidence, trust, and expert help,” while Intuit CEO Sasan Goodarzi highlighted “AI-powered human expertise” as central to Intuit’s tax strategy. The IRS deadline could drive additional demand for paid consultations and customer service calls, particularly for complex or late claims.
Market and Investor Implications
The Associated Press reported that the IRS issued over 120 million penalties from January 2020 to July 11, 2023. Treasury official Ken Kies told AP that the administration considered Kwong “wrongly decided.” Alyssa Maloof Whatley, director at Frost Law, noted that filing allows taxpayers to retain the right “to that money” if the ruling stands. However, the Justice Department’s appeal and the IRS’s lack of a standard process mean that refunds are not assured and could take years to resolve.
Investors are not expected to focus on the immediate refund numbers but rather on whether the complex, deadline-driven process boosts customer service calls, paid consultations, and loyalty for companies that have expanded their assisted tax offerings. For taxpayers, the key takeaway is clear: get a valid claim in by Friday, or risk missing out on a refund even if the courts later side against the IRS.
