A recent court decision, Kwong v. United States, may open the door for certain taxpayers to request refunds or abatements of IRS penalties and interest assessed during the COVID-19 federal disaster period.
The issue remains unsettled as the government has challenged the court’s interpretation. But taxpayers who believe they may have an eligible claim should not wait. In many cases, taxpayers may need to act before the July 10, 2026, deadline to preserve their rights.
What Happened in Kwong v. United States?
In Kwong v. United States, the Court of Federal Claims reviewed a tax code provision that gives taxpayers extra time to file or pay taxes when there is a federally declared disaster. That statute, Internal Revenue Code § 7508A(d), provides automatic deadline relief during certain disaster
periods.
One important question was which version of the law applied. The court used the 2019 version because that was the version in effect when COVID-19 was declared a federal disaster in early 2020. The court did not apply the amended 2021 version because that amendment came after the COVID-19 disaster declaration and applied only to disasters declared after the amendment became law.¹
Under the 2019 version, the automatic postponement period ran from the beginning of the disaster period through 60 days after the disaster period ended. The court found that the
COVID-19 disaster period began on January 20, 2020, and ended on May 11, 2023. Adding the extra 60 days, the court concluded that the mandatory postponement period extended through
July 10, 2023.²
In simple terms, the court’s decision means that certain tax filing and payment deadlines that fell during the COVID-19 disaster period may have been postponed until July 10, 2023.
Why Does This Matter?
This matters because the IRS assessed penalties and interest against many taxpayers during the COVID-19 period. Under the reasoning in Kwong, some of those penalties and interest may have been assessed too early or should not have been assessed at all.
Potentially affected amounts may include:
● late-filing penalties;
● failure-to-pay penalties;
● estimated tax penalties;
● underpayment interest; and
● related penalties or interest tied to deadlines that fell during the COVID-19 disaster period.
The National Taxpayer Advocate has warned that tens of millions of taxpayers may be eligible for refunds or abatements, but relief generally will not be automatic. Taxpayers may need to file a claim to protect their rights.³
Why it the SALT Deduction Important?
Even if a taxpayer may qualify for relief under Kwong, determining eligibility may not be straightforward. The taxpayer’s IRS transcripts, notices, payment history, and penalty assessments may need to be reviewed to determine whether the penalties or interest relate to
deadlines during the COVID-19 disaster period.
Because the issue remains unsettled as the government has challenged the court’s interpretation, taxpayers should consider seeking professional guidance before filing a claim. A tax attorney can help evaluate whether the taxpayer may have an eligible refund or abatement
claim and whether a protective claim should be filed to preserve the taxpayer’s rights.
What Should Taxpayers Do Now?
Taxpayers should begin by gathering their IRS records, including account transcripts, IRS notices, payment history, and any documents showing penalties or interest assessed during the COVID-19 period.
A taxpayer may have a potential claim if the IRS charged penalties or interest for filing or paying late on an obligation that was due between January 20, 2020, and July 10, 2023. Common examples may include late-filing penalties, failure-to-pay penalties, estimated tax penalties, and related interest.
If eligible, taxpayers will need to request a refund or ask the IRS to remove penalties or interest. Taxpayers who already paid penalties or interest may need to file a refund claim. Taxpayers who still owe penalties or interest may need to request an abatement. The National Taxpayer Advocate has also noted that protective claims may be used to preserve refund rights while the legal issue remains unresolved.⁴
Taxpayers who believe they may have an eligible claim should contact our office before the July 10, 2026, deadline so we can review their records and determine whether a refund claim, abatement request, or protective claim may be appropriate.
Sources:
¹ Kwong v. United States, 179 Fed. Cl. 382, 396–98 (2025).
² Id. at 398-401.
³ Erin M. Collins, Tens of Millions of Taxpayers May Be Eligible for Significant Tax Refunds—If
They Act by July 10 (Part I), TAXPAYER ADVOC. SERV. (Apr. 30, 2026),
https://www.taxpayeradvocate.irs.gov/news/nta-blog/tens-of-millions-of-taxpayers-may-be-eligible-for-significant tax-refunds/2026/04/.
⁴ Id