COVID-Era Refund Claims Due July 10, 2026
Taxpayers may be entitled to billions in penalty and interest refunds due to the Kwong case
In Kwong v. United States, 179 Fed. Cl. 382 (2025), the U.S. Court of Federal Claims held that the version of the §7508A automatic disaster postponement in effect during the COVID-19 pandemic suspended the §6532(a) deadline for filing a refund suit for the entire duration of the federally declared disaster, starting January 20, 2020 (the earliest incident date in the COVID-19 federal disaster declaration) through 60 days after FEMA’s formal end date of May 11, 2023, which is July 10, 2023.
The Kwong holding logically extends to most other filing and payment deadlines that began on January 20, 2020, and ended on July 10, 2023, opening the door to a refund or an abatement of any penalties or interest that accrued during that period.
While there is no statute of limitations on an abatement request for an unpaid amount (assuming the collection statute of limitations has not expired), the refund statute of limitations does apply to a Kwong claim. Read more about it in this prior article:
An Overview of the Refund Statute of Limitations
Anytime a taxpayer has an overpayment of tax and requests a refund, whether it is an original return, an amended return, or another document filed with the IRS, the amount must be refundable within t…
Recent Law Change Opens the Door to Refund Claims
New §7508A(f), which was added to the Code in the Disaster Related Extension of Deadlines Act (P.L. 119-64), provides that for purposes of the §6511(b)(2)(A) three-year lookback period, any period disregarded under §7508A shall be treated as an extension of time for filing the return. The COVID postponement period is now added to the three-year lookback window, ensuring that timely refund claims result in actual refunds. Two important notes about this rule:
It only applies to refund claims filed after December 26, 2025, and
It does not apply to refund claims in which the refund amount is limited to the amount paid in the two years immediately preceding the claim.
Practical Kwong Example
Daisy filed her 2021 Form 1040 on August 8, 2022. As a result of filing late, she was assessed $22,502 in §6651(a)(1) late-filing penalties, §6651(a)(2) late-payment penalties, and interest, which Daisy fully paid on September 12, 2022.
Under the Kwong holding, §7508A postponed the deadlines for the 2021 Form 1040 filing and the payment of any balance due to July 10, 2023; therefore, the penalty and interest assessments were erroneous, and the taxpayer is entitled to a refund.
Assume that Daisy files a refund claim on June 3, 2026 for $22,502.
Step 1 — §6511(a): Is the Refund Claim Timely? Without Kwong, the three-year period runs to August 8, 2025, and the two-year period runs to September 12, 2024. The later of the two dates is August 8, 2025, and a refund claim filed June 3, 2026, is not timely; no refund is allowed.
Applying the Kwong analysis, §7508A disregards the COVID-19 postponement period in computing the §6511(a) window, so the three-year period begins July 10, 2023, and runs through July 10, 2026. The refund claim filed on June 3, 2026 is timely.
Step 2 — §6511(b)(2)(A): What is the Refundable Amount? Without §7508A(f), the three-year lookback starting June 3, 2026 runs back only to June 3, 2023. The $22,502 was paid on September 12, 2022, and falls entirely outside the three-year lookback window. The claim is timely, but there are no refundable payments.
Applying §7508A(f), the COVID-19 postponement period is treated as an extension for three-year lookback period purposes:
The taxpayer filed the claim on June 3, 2026, so the normal three-year period runs back to June 3, 2023.
The period from August 8, 2022, to July 10, 2023, is 336 days, which extends the three years.
The extended three-year period runs to July 2, 2022.
Since the September 12, 2022 payment date falls within that expanded window, the refund claim filed on June 3, 2026 for $22,502 is entirely recoverable.
Next Steps
The IRS is likely to appeal Kwong to the Federal Circuit Court of Appeals; as such, a taxpayer with a Kwong claim should file a protective claim using Form 843, Claim for Refund and Request for Abatement. Internal Revenue Manual (IRM) 4.10.11.2.1.3(4) (09-04-2020) provides an excellent explanation of protective refund claims and their essential elements:
In some instances, a claim may be filed by the taxpayer in anticipation of an expected change in the tax law, other legislation, regulations, case law, or other contingency. A “protective claim” is a claim for credit or refund filed by the taxpayer to preserve the right to pursue a refund based on the resolution of an issue contingent on future events that may not be determinable until after the refund statute has expired. Taxpayers file protective claims to ensure they meet the timeliness requirement. With regard to the requirements of form and content, a protective claim must be in writing, include the taxpayer’s name, address, TIN and signature, identify the contingency affecting the claim, be sufficiently clear and definite to alert the IRS as to the essential nature of the claim, and identify the specific year(s) for which the refund is sought. The exact amount of refund requested may not be known at the time the claim is filed…
IRM 25.6.1.10.3.2.5 (07-05-2024) states the IRS has discretion in how to process protective refund claims:
…A valid protective claim need not state a particular dollar amount or demand an immediate refund; however, the claim must identify and describe the contingencies affecting the claim; must be sufficiently clear and definite to alert the IRS as to the essential nature of the claim; and must identify a specific year or years for which a refund is sought.
The IRS has discretion in deciding how to process protective claims. In general, it is in the best interests of the IRS and taxpayers to delay action on protective claims until the pending litigation or other contingency is resolved. Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then allow or disallow the claim.
Be sure to address the following in the Form 843 explanation:
It is a protective claim due to Kwong v. United States, 179 Fed. Cl. 382 (2025),
Why §7508A applies to the situation to warrant penalty and/or interest removal,
The claim amount calculation, if needed (using a tool like TaxInterest), and
How the claim is timely under the refund statute of limitations.
The work in determining eligibility for these claims is significant, as is the uncertainty of processing. But, on the other hand, they can be extremely lucrative to clients if other courts uphold Kwong. Practitioners may want to consider a hybrid fee model: a flat, upfront fee to file the claim, plus a contingent fee if the IRS issues the refund.
Circular 230 §10.27(b)(3) permits contingent fees “for services rendered in connection with a claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the Internal Revenue Service.”
Sample Kwong Refund Claim
Tom’s Tax Toolbox contains a sample Form 843, Claim for Refund and Request for Abatement, for a Kwong refund claim for a §6654 estimated tax penalty.
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