A recent decision by the U.S. Court of Federal Claims—the Kwong case—may reopen refund, penalty, and interest relief opportunities for millions of taxpayers affected by IRS deadlines during the COVID‑19 pandemic. In Kwong v. United States, the court held that federal tax deadlines were automatically suspended for the entire federally declared COVID‑19 disaster period, from January 20, 2020 through July 10, 2023, plus a mandatory 60‑day extension. As a result, certain refund claims and challenges that the IRS previously considered “late” may actually be timely, with many claims now due as late as July 10, 2026.
What Happened in the Kwong Case?
The Kwong case is a very technical case. Taxpayer Terry Kwong sued the United States seeking refunds of penalties the IRS had assessed for earlier tax years.
Normally, a taxpayer has two years after the IRS denies a refund claim to file suit. The IRS argued that Mr. Kwong missed that deadline and asked the court to dismiss the case. The Court of Federal Claims disagreed. It ruled that Internal Revenue Code §7508A(d), as amended before the pandemic, automatically tolled (suspended) tax deadlines for the entire COVID‑19 federally declared disaster period, not merely the short extensions the IRS announced in notices during 2020. Because the President’s nationwide COVID emergency began on January 20, 2020 and FEMA designated its end as May 11, 2023, the court concluded that statutory deadlines were postponed through July 10, 2023.
Why the Kwong Case Matters
The Kwong case is relevant to a large swath of taxpayers who paid taxes late or were entitled to refunds from January 20, 2020 – July 10, 2023. During this time, the IRS imposed penalties on some taxpayers for untimely reporting, while they withheld overpayment from others, and ultimately did not pay interest on the long-held overpayments, in accordance with pre-COVID-19 rules. What resulted was many taxpayers paying penalties they may not have been required to pay, or taxpayers not receiving interest on the refund of overpayments that they may have been entitled to.
What Is the New Deadline?
Based on the court’s interpretation in the Kwong case, many time‑sensitive deadlines are treated as expiring three years after July 10, 2023, making July 10, 2026 a critical date for filing refund claims or penalty‑abatement requests. This aligns with standard statute‑of‑limitations principles once the disaster tolling period is excluded. Tax professionals widely recommend filing protective claims before that date, even if the IRS disputes them or an appeal is pending.
Will the IRS Appeal the Kwong Case?
As of now, the IRS is expected to appeal the decision in the Kwong case, but it has not done so at the time we are making this post. While an appeal could narrow or reverse the ruling, filing claims now preserves taxpayer rights if the decision ultimately stands. Waiting for final resolution risks losing relief altogether.
Conclusion
The Kwong case represents one of the most taxpayer‑friendly interpretations of COVID‑era tax relief to date. Courts appear increasingly skeptical of the IRS’s narrow application of pandemic relief when the statute itself mandated broader protection. If you paid penalties or interest, missed deadlines, or had claims denied during the COVID disaster period, this ruling may provide a second chance. With July 10, 2026 fast approaching and legal uncertainty still ahead, now is the time to review your situation with a qualified tax professional and determine whether a claim should be filed.
Note: The Pollock Firm does NOT prepare income tax returns or claims for refund. This post is intended strictly as an informational update. Thank you to Brendan R. Hanley for assisting with this blog post.
