A recent Court of Federal Claims decision, Kwong v. United States, may create an opportunity for some taxpayers to file refund or abatement claims for certain penalties, interest, and possibly other amounts affected by the COVID-19 disaster-relief deadline rules under IRC section 7508A(d).
What This Means for You
Under the reasoning of the Kwong decision, you may be entitled to a refund or abatement of certain amounts assessed during the COVID period, including:
- Penalties assessed for failure to timely file returns, failure to pay taxes, or failure to make estimated tax payments;
- Interest that began accruing earlier than it should have, or not at all; and
- Overpayment interest for the 2020–2023 disaster period.
Understanding the Kwong Decision and Its Implications
In Kwong, the court held that, under the pre-2021 version of section 7508A applicable to the COVID-19 disaster declaration, the mandatory postponement period ran from January 20, 2020, through May 11, 2023. Sixty additional days extended the period to July 10, 2023, for tax purposes.
Based on that reasoning, some taxpayers may still be able to pursue refund claims that otherwise appeared time-barred, including claims relating to penalties and interest assessed during that period, assuming that refund claim is filed on or before July 10, 2026.
This area remains unsettled. The government has challenged similar positions, and future litigation could narrow or reject parts of Kwong’s reasoning. Even so, taxpayers who may be affected should consider filing a refund claim or protective claim before applicable limitation periods expire. It may take several years until the issue is finally resolved by the courts.
What Should You Do?
If you believe you were subject to substantial IRS penalties and interest during the COVID disaster period, please contact your tax advisors at A+P CPAs. We can help review whether your account may be affected by the Kwong decision and prepare a protective refund claim.
