In November 2025, the U.S. Court of Federal Claims issued a landmark ruling in Kwong v. United States, challenging the IRS’s authority to assess certain late fees during the pandemic. A federal disaster declaration was in effect for COVID-19 from January 20, 2020, through May 11, 2023.
The central issue in the case was whether the postponement of tax filing and payment deadlines lasted only 60 days after the start of the declaration, as the IRS argued, or whether it extended through the entire duration of the disaster declaration plus 60 additional days, as the taxpayer claimed.
The court ruled in favor of the taxpayer, holding that the plain language of the statute requires postponement of tax deadlines for the full disaster period, plus an additional 60 days. The court rejected the IRS’s narrower interpretation and found no basis for limiting relief to only 60 days. As a result, taxpayers had a significantly longer period to file returns, make payments, and claim refunds related to the pandemic.
Based on the court’s reasoning in Kwong, filing and payment deadlines were postponed throughout the entire period. Consequently, tax returns and payments due at any point within that window were not considered late until after July 10, 2023. The court further concluded that the IRS should not have assessed penalties for late filing or payment during this approximately 3.5-year period, nor charged interest on those amounts.
What This Means for You
Under the Kwong decision, you may be entitled to a refund or abatement of certain amounts assessed during the COVID-19 period, including:
- Penalties for failure to timely file returns, pay taxes, or make estimated tax payments
- Interest that began accruing earlier than it should have—or should not have accrued at all
- Overpayment interest for the 2020–2023 disaster period
The decision also has implications for Employee Retention Credit (ERC) recipients who filed amended returns. Under Kwong, 2020 and 2021 income tax returns were not effectively due until July 10, 2023. As a result, IRS bills for failure-to-pay penalties and underpayment interest may be overstated. ERC recipients who paid these amounts may be entitled to refunds, like other affected taxpayers.
Protect Your Right to a Refund
This issue is not yet fully settled law. The government has appealed the Kwong decision to the U.S. Court of Appeals for the Federal Circuit. Because the appeals process could take years, taxpayers should file a protective claim to preserve their refund rights. In effect, a protective claim notifies the IRS:
“I am preserving my right to this refund. If the appellate court upholds the Kwong ruling, I am entitled to payment.”
For most taxpayers, protective claims must be filed by July 10, 2026. This deadline reflects the standard three-year statute of limitations for refund claims under IRC § 6511(a). Because the court held that filing deadlines were extended to July 10, 2023, the three-year period to request refunds began on that date.
Review IRS Transcripts
Taxpayers should review their IRS transcripts, ideally through an individual or business online IRS account. These accounts allow users to view, download, and print transcripts immediately.
An IRS tax account transcript provides a timeline of key activity, including:
- When a return was filed
- When tax was assessed
- Payments and credits
- Penalties and interest charged
- Refunds issued
Although transcripts can be difficult to interpret, taxpayers should focus on dates and transaction entries—particularly those involving tax assessments, payments, penalties, interest, account adjustments, and refunds. This review helps determine whether activity falls within the relevant COVID-19 period (January 20, 2020, through July 10, 2023).
Filing Protective Claims for Kwong-Related Issues
A protective claim is generally filed when the exact amount of a refund is uncertain and depends on how a pending legal issue is resolved—here, the Kwong case. Unlike a formal claim, a protective claim does not require the taxpayer to calculate the precise refund amount or request immediate payment.
To be valid, a protective claim must:
- Be in writing and signed
- Include your name, address, and taxpayer identification number (SSN, ITIN, or EIN), along with contact information
- Identify and describe the legal issue affecting the claim
- Clearly state the basis for the claim
- Specify the relevant tax year(s)
In most cases, taxpayers will need to file Form 843, writing “Protective Refund Claim Pursuant to Kwong” (or similar language) across the top, and providing as much detail as available. Typically, a separate Form 843 must be filed for each tax period and each type of tax.
Conclusion
This is a complex and evolving legal issue. This article is intended to raise awareness, not to provide legal advice. Taxpayers should evaluate their individual circumstances and consider seeking professional guidance where appropriate.
Filing a refund claim or protective claim now can preserve your rights while the law develops. Waiting for a final resolution may result in a missed opportunity.
For taxpayers affected by COVID-19 disaster relief postponements, the opportunity to recover penalties and interest may be significant, but it is not guaranteed. The July 10, 2026 deadline is critical, and affected taxpayers should act promptly to determine whether a claim is appropriate.
Dean Dorton is actively monitoring developments in this case and is ready to assist with any Kwong related filings or questions you may have.
Questions about how this ruling may affect you? Contact our team today.
