Additional Contributors
A recent federal court case, Kwong v. United States, has created significant discussion within the tax community regarding whether certain IRS penalties and interest assessed during the COVID-19 federal disaster period—January 20, 2020-July 10, 2023—may have been improperly charged. Taxpayers should note the quickly approaching deadline of July 10, 2026, to file a potential refund claim.
What is the Kwong v. United States case?
To assist taxpayers impacted by the COVID-19 pandemic, the IRS originally provided an extension until July 15, 2020, for filing and payments of 2019 returns and 2020 first-quarter estimated payments. The agency later issued multiple rounds of filing and payment relief, including another postponement from April 15-May 17, 2021. The Kwong case alleged that the IRS improperly assessed penalties and interest during the disaster period.
What did the federal court decide in Kwong?
The Kwong ruling suggests the relief period was substantially broader than previously applied administratively by the IRS. Focusing on the interpretation of Internal Revenue Code Section 7508A(d), which addresses postponement of federal tax deadlines during federally declared disasters, the court concluded that certain tax deadlines should have been suspended for the duration of the COVID-19 federal disaster period—extending from January 20, 2020, through July 10, 2023.
Who may be eligible for IRS refund claims, and what is Form 843?
As a result of the Kwong decision, some taxpayers may now have refund opportunities related to failure-to-file and failure-to-pay penalties, interest, and other time-sensitive IRS compliance deadlines previously assessed by the IRS during the COVID-19 disaster period. Eligible taxpayers might be able to file IRS Form 843, a protective claim requesting refunds or abatements associated with penalties and interest assessed during the disaster period and preserving taxpayers’ rights while litigation is ongoing.
What is the July 10, 2026, filing deadline?
The timing of filing Form 843 is very limited and important to monitor. The deadline for eligible taxpayers to file protective refund claims using Form 843 is July 10, 2026, due to the statutes of limitations that apply to refunds.
What should taxpayers do to claim a refund?
PYA’s Tax professionals can evaluate your eligibility for protective refund claims, assist with preparing and filing Form 843, and answer your questions about the court decision and refund opportunity. Learn more about PYA’s Tax Advisory Services.
The legal landscape surrounding the Kwong decision is evolving, and PYA will continue to monitor developments and provide updates as needed.
