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If you paid IRS penalties or interest between January 20, 2020, and July 10, 2023, or had returns or payments assessed as late during that period, you may wish to file a protective refund claim before July 10, 2026.  Please contact us as soon as possible if you would like assistance assessing your situation or preparing a claim.

A recent U.S. Court of Federal Claims decision, Kwong v. United States, potentially opens the door to tax refunds for individuals, companies, and non-profit organizations. The court ruled that under federal law, tax filing and payment deadlines were automatically extended for the entire duration of the COVID-19 federal disaster period, plus 60 days — meaning from January 20, 2020, through July 10, 2023.

Under this reasoning, penalties and interest the IRS assessed for “late” filings or payments during that 3 1/2-year window may have been improper — and you may be entitled to a refund or abatement.  While the case does not directly address penalties and interest, its interpretation suggests that many amounts assessed during this period may have been improper.

What This Could Mean for You

If the Kwong decision is ultimately upheld, you may be eligible for:

  • Refunds of penalties already paid for failure to timely file, failure to pay, or failure to make estimated tax payments during the COVID-19 disaster period;
  • Refunds of interest assessed on those penalties;
  • Abatement of assessed penalties and interest not yet paid; and
  • Potential relief even for taxpayers who were already delinquent before the pandemic began (though this remains contested).

Important Caveats — Nothing Is Certain Yet

This is an evolving situation. The IRS disagrees with the Kwong ruling and the Department of Justice is expected to appeal. It may take years before the courts reach a final resolution. There is no guarantee that Kwong will be upheld or that penalties or interest will be refundable based on Kwong. However, if you do not take action before July 10, 2026, you may not be entitled to a refund even if the courts ultimately rule in taxpayers’ favor.

The July 10, 2026 Deadline: Why It Matters

Refunds are not automatic.  In most cases, the IRS will not issue a refund or abate a tax assessment unless you file a formal claim. The standard deadline is generally the later of (i) three years from the date you filed your return or (ii) two years from the date you paid the tax. For most pandemic-era penalties and interest, that window closes July 10, 2026.

Because the legal outcome is uncertain, if you want to preserve your rights to a possible refund, a protective refund claim, a formal IRS filing that preserves your right to a refund while the courts sort out the issues, may need to be filed.

What’s Next

The National Taxpayer Advocate has publicly called on the IRS to broadly publicize this issue, provide a six-month extension for filing refund claims, and consider creating an electronic filing portal for Kwong-related claims. However, unless IRS guidance is issued quickly, it appears that if you want to preserve your rights to a possible refund, you must act before the July 10, 2026 deadline.

Disclaimer: This advice isn’t intended or written to be used for the purpose of avoiding penalties and cannot be used for that purpose.