How The Kwong Decision Impacts Potential Tax Refunds | Ohio CPA Firm

U.S. Court of Federal Claims in Kwong v. U.S. (11/2025) (“Kwong”) makes it possible for many individuals and businesses to obtain refunds (or abatements) of IRS penalties and interest that were charged during the COVID‑19 disaster period. However, you generally must act by July 10, 2026, to preserve your rights.

What The Kwong Decision Did

The U.S. Court of Federal Claims held that federal tax filing and payment deadlines were automatically postponed for the entire COVID‑19 federal disaster period, from Jan. 20, 2020, through July 10, 2023, under Internal Revenue Code § 7508A. § 7508A(d)  deals with the postponement of certain deadlines as the result of a federally declared disaster. The 2019 version of the statute allowed for the postponement of tax deadlines for the full duration of the disaster period plus 60 days. Note the statute has since been amended to shorten the eligible period. Practically, that means many due dates that originally fell within that window are treated as if they were due July 11, 2023. Because deadlines were postponed, certain penalties and interest that accrued between Jan. 20, 2020 and July 10, 2023 may have been improperly imposed by the IRS.

How This Creates Refund Opportunities

If you paid IRS penalties or related interest tied to obligations due between Jan. 20, 2020 and July 10, 2023, those amounts may now be refundable because they should not have been imposed during the disaster period. This applies to many common penalties and/or interest such as:

• Failure‑to‑file (FTF) penalties – IRC § 6651(a)(1).
• Failure‑to‑pay (FTP) penalties – IRC § 6651(a)(2) and (3).
• Interest on tax and on these penalties

Some other categories of eligible penalties could be:

• Estimated‑tax penalties – IRC § 6654 (individuals) and § 6655 (corporations).
• Certain information‑return penalties.

Effect On The statute Of limitations

Refund and abatement claims are normally limited by the usual statute of limitations rules in IRC § 6511 (generally three years from the filing deadline or two years from payment, whichever is later). By treating the COVID period as a tolling/extension window, Kwong effectively pushes many refund‑claim deadlines out to July 10, 2026 for penalties and interest tied to deadlines that fell between Jan. 20, 2020 and July 10, 2023.

What’s Next Regarding The U.S. Court Of Federal Claims Decision

The decision in Kwong may not be final. The IRS still has the ability to appeal the decision, and it is expected that they will do so. Even if the IRS does appeal the decision, taxpayers must act before July 10, 2026, or potentially lose out on the ability to file a claim in the future, as the statute of limitations is not suspended during an appeal.

Practical Next Steps

Here are some practical steps that you need to take before July 10, 2026:

• Review your IRS online account transcripts to identify any failure‑to‑file, failure‑to‑pay, or underpayment‑interest entries that accrued between Jan. 20, 2020,  and July 10, 2023.
• If you were assessed these amounts, prepare a Form 843 (Claim for Refund and Request for Abatement) for each tax return and period impacted and mail it (cannot be e‑filed), ideally via certified mail, to establish timely filing before July 10, 2026.
• When filing the Form 843, consider filing a “protective claim” if you are unsure of the exact amount of the claim or that the claim would be allowed (ultimate decision in the case if the IRS appeals). This “protective claim” freezes the statute of limitations while appeals of Kwong are pending. The IRS will place the claim in  suspense pending the outcome.

This refund opportunity applies to individual, corporate, employment tax, and informational returns. If you paid penalties or interest to the IRS related to  the eligible time periods, reach out to your GBQ tax advisor or the employment tax services group for more information on filing a protective refund claim.