Individuals and businesses struggled during COVID, and many were unable to keep up with their tax obligations. Thanks to a federal court decision in Kwong v. United States, taxpayers may be able to obtain refunds or penalty abatements for IRS penalties and interest attributable to the 2019 through 2021 tax years. Critically, for taxpayers seeking refunds of amounts they have already paid, the protective deadline may be July 10, 2026.
The Issue in Kwong
During the COVID-19 pandemic, the federal government declared a nationwide disaster emergency. On January 20, 2020, the disaster declaration went into effect. The public health emergency ended on May 11, 2023. Taxpayers may recall that the IRS extended the due date for 2019 tax returns and payments to July 15, 2020, and for 2020 tax returns and payments to May 17, 2021.
In late 2025, the U.S. Court of Federal Claims ruled in Kwong that the national disaster declaration automatically extended federal tax deadlines for a much longer period than the IRS granted. The court held that IRC § 7508A(d) operated to extend return and payment due dates for the entire period of the disaster declaration plus 60 days. Running that clock from the disaster’s end date plus 60 days, the court found that the due dates for the 2019, 2020, and 2021 tax returns were postponed through July 10, 2023. The result is that 2019 tax returns filed after July 15, 2020 should not have received late-filing penalties, and 2019 payments made after such date should not have received late-payment penalties and interest on the late payments and penalties should never have accrued during the disaster declaration window.
The United States disagrees with this interpretation of IRC § 7508A. On May 20, 2026, the United States filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. The outcome of that appeal is uncertain, and the IRS may hold or outright reject claims based on Kwong while the appeal is pending.
Who Might Qualify?
If the Court of Federal Claims is correct, the decision could have far-reaching implications for taxpayers. Individuals, trusts, and estates may have refund or abatement claims relating to income, estate, and gift taxes for 2019, 2020, and 2021. Businesses may have claims relating to income and employment taxes. Nonprofits may have claims relating to excise taxes.
The Kwong reasoning could reach even further, and could arguably be extended to taxpayers with penalties and interest from earlier tax years if the penalties and interest accrued during the disaster years. Further, the National Taxpayer Advocate has stated that the decision may apply to taxpayers who late filed international information returns,[1] such as Form 5471 or Form 3520, and late filing these returns can result in draconian penalties.
A Note on Prior IRS Relief
In 2022, the IRS issued Notice 2022-36[2] to provide automatic relief from certain failure-to-file penalties for 2019 and 2020 income tax returns, but only for returns that were filed by September 30, 2022. The Notice did not apply to late-payment penalties or interest. As a result, even taxpayers who previously received some penalty abatement may still have claims under Kwong for penalties that fell outside Notice 2022-36 as well as interest.
Refund vs. Abatement
It is important for taxpayers to understand whether they have a refund claim or an abatement request under Kwong because the procedural rules and deadlines differ. Refund claims are for taxpayers who paid COVID-era penalties and interest. Taxpayers with refund claims have to follow the statute of limitations period under IRC § 6511, which is generally the later of three years from the filing of the tax return or two years from payment. The referenced due date of July 10, 2026 reflects the three-year window as measured from the July 10, 2023 due date that was held in Kwong. However, a taxpayer’s specific facts may result in a different deadline. Taxpayers with refund claims can file amended returns or a Form 843 and specifically reference that their claim is a protective refund claim under Kwong.
Taxpayers who have been assessed COVID-era penalties and interest but who have not yet paid must submit a request for abatement. The deadline for each taxpayer is different, so July 10, 2026 is not necessarily a cutoff. Taxpayers with abatement requests generally fille Form 843 and should also specifically reference that their request is a protective claim under Kwong.
Take Action Now
Taxpayers should review their IRS accounts, prior IRS correspondence, or obtain account transcripts to determine whether they paid or accrued late-filing or late-payment penalties or interest for their 2019, 2020, or 2021 tax years. Taxpayers may need professional help in analyzing their transcripts, as the IRS may have credited 2019, 2020, or 2021 with amounts from other tax periods.
For taxpayers seeking refunds of amounts already paid, July 10, 2026 may be the operative deadline to preserve refund rights. Because the appeal in Kwong could take years to resolve, taxpayers should file protective refund or abatement claims before the deadline to preserve their rights.
[1] https://www.taxpayeradvocate.irs.gov/news/nta-blog/beyond-penalties-and-interest-how-kwong-may-affect-missed-tax-refunds-part-iv/2026/05/.