If You Paid or Were Assessed Penalties or Interest by the IRS During the COVID-19 Pandemic, You May Be Due a Refund
A Federal disaster declaration was in effect for the COVID-19 pandemic from January 20, 2020, through May 11, 2023. A recent court decision (Kwong v. United States, 179 Fed. Cl. 382 (Nov. 2025)) reviewed a tax code provision that governs disaster-related tax filing and payment deadline postponements. Internal Revenue Code § 7508A(d), as it existed when the COVID-19 federal disaster was declared, provides for the automatic postponement of tax filing and payment deadlines until the end of a federal disaster declaration, plus 60 days. The court ruled that the COVID-19 disaster pushed many tax filing and payment deadlines out to July 10, 2023 – 60 days after the end of the COVID-19 disaster declaration period.
What Does This Mean for Taxpayers?
If the IRS charged you late-filing penalties, late-payment penalties, estimated-tax penalties, and/or interest during the COVID-19 disaster period, you may be able to have those penalties and interest removed. If you already paid the penalties and interest, you may be eligible for a refund of the amount paid.
There is a catch though. The IRS will not determine your eligibility for a refund for you. For most taxpayers, you must preserve your right to a refund by filing a claim with the IRS. In most cases, this must be done no later than July 10, 2026. The remainder of this article explains the Kwong case, what it may mean for you, and how a claim for a refund works.
What Did the Kwong Case Actually Decide?
In Kwong v. United States, Terry Kwong, the taxpayer, paid penalties imposed by the IRS for several old tax years. Mr. Kwong then asked the IRS to refund those payments. The IRS denied his request for a refund in the fall of 2020. Once the IRS mails a denial of a claim, the taxpayer has two years to take the government to court seeking a refund. Mr. Kwong filed his lawsuit in February 2023, more than two years after the denial. Under normal circumstances, the filing would be late and Mr. Kwong would not be allowed to make his claim in court. The government asked the court to throw out the case as untimely.
The court did not agree with the government. The court held that Mr. Kwong’s deadline to sue had been paused during the COVID-19 disaster declaration. The court looked at Internal Revenue Code § 7508A. Reading the version of that statute in effect when the COVID-19 disaster was declared, the court found that the law automatically disregards deadlines for the entire length of a federally declared disaster, plus 60 days.
The court noted that the COVID-19 disaster declaration ran from January 20, 2020 through May 11, 2023. Adding the statute’s additional 60-day tail, the postponement period extended to July 10, 2023.
Since Mr. Kwong’s deadline to claim a refund had been pushed out to at least July 10, 2023, his February 2023 lawsuit was filed timely.
The Kwong decision builds on an earlier Tax Court case, Abdo v. Commissioner, 162 T.C. 148 (2024), which reached a similar conclusion about the same statute and likewise struck down the IRS’s regulatory limit.
It is worth noting that the Kwong case decided that a lawsuit was filed on time. It did not directly rule that every penalty and all interest charged during the 2020–2023 COVID-19 disaster period was not allowed. It follows, however, that if those deadlines were postponed because of the statute, then penalties and interest tied to them should not have been charged. This issue is not yet settled law and the government recently filed an appeal of the Kwong decision.
Here is What Kwong May Mean for You.
The IRS calculates late-filing and late-payment penalties, the estimated-tax penalty, and interest starting on the tax return’s due date or the payment’s due date.
If those due dates were legally postponed to July 10, 2023, then a tax return filed or payment made during that window was never actually “late,” and the related penalties and interest should not have been charged.
You may be eligible for a refund or abatement of certain amounts if you had a tax return or payment originally due between January 20, 2020 and July 10, 2023, and the IRS charged you any of the following:
- A failure-to-file penalty
- A failure-to-pay penalty
- An estimated-tax (underpayment) penalty
- Underpayment interest
- Certain international information return penalties
What About Missed Refunds?
Taxpayers may also be able to revive missed refunds for tax years 2019 – 2022. Normally, taxpayers have three years to request a refund. If a taxpayer never filed a tax return, or filed a tax return late, and was due a refund, the refund request may be denied by the IRS as time-barred.
What You May Need to Do; Request for Refund or Request for Abatement
The IRS will not issue a refund or abate taxes assessed unless a taxpayer files a claim.
Taxpayers must file their claim within three years from the date they filed their tax return or two years from the date they paid their tax. Most taxpayers will need to file claims by July 10, 2026, using Form 843, Claim for Refund and Request for Abatement.
What is the difference between a request for refund or request for abatement?
- If you already paid the penalty or interest and want it back, you are requesting a refund.
- If the IRS assessed the penalty or interest but you have not paid it yet, you are asking for an abatement (a removal or reduction of the unpaid assessment).
What is a Protective Claim?
Because the Kwong decision has been appealed and the final outcome is unknown, many taxpayers face a timing trap – the deadline to file a claim may expire before the appeal of the Kwong case is decided. A protective claim is designed for this situation.
A protective claim preserves your right to a refund while a legal question is still being resolved. The claim is filed now, the IRS holds the claim in suspense until the law is settled, and, if the courts ultimately side with taxpayers, you have “perfected” your claim. Filing a protective claim stops the statute of limitations from running out while you wait for the legal matter to be settled.
Frequently Asked Questions
- What is the Kwong issue in plain English? A federal court read the disaster-relief statute to postpone many tax deadlines to July 10, 2023. If that ruling is upheld it means that the IRS charged penalties and interest tied to deadlines that taxpayers never actually missed. Those penalties and interest amounts may be refunded or removed.
- Which tax years are involved? Tax years 2019, 2020, 2021, and 2022 are likely at issue. But taxpayers should determine whether a penalty or interest charge relates to a filing or payment deadline that falls within the January 20, 2020 – July 10, 2023 window.
- Will the IRS automatically issue refunds? The IRS will not determine your eligibility for a refund or abatement. You will have to file a claim.
- What form do I use? For penalties and interest, use Form 843, Claim for Refund and Request for Abatement.
- What is the difference between a refund and an abatement? A refund returns money you already paid to the IRS. An abatement removes or reduces a charge the IRS made that you have not yet paid.
- What is a protective claim, and why file one? It is a claim that preserves your right to a refund while the law or case has not been settled. Since Kwong has been appealed, a protective claim lets you stop the clock now and collect later if taxpayers prevail.
- Does this apply to state tax penalties too? Not automatically. Kwong is about federal tax law. State penalties and interest must be reviewed separately under each state’s own rules.
- What is my actual deadline to claim a refund? For many people it is July 10, 2026. But your deadline depends on your specific filing dates, payment dates, and the claim type.
Conclusion
If you paid or were charged late-filing penalties, late-payment penalties, estimated-tax penalties, and/or interest during the COVID-19 pandemic disaster declaration, between January 20, 2020, and July 10, 2023, you should consider a claim for a refund or abatement.
If you would like our help reviewing your IRS transcripts and evaluating whether a Kwong-based claim makes sense for you, please call the McDowell Law Group to schedule a consultation.
This article is provided for general informational purposes only and does not constitute legal or tax advice, nor does it create an attorney-client relationship. The law discussed here is unsettled and subject to change, including as a result of the pending appeal. Deadlines and outcomes depend on your specific facts. Please consult a qualified tax professional about your individual situation before acting.