Did You Pay IRS Penalties or Interest During COVID? The Kwong Decision May Mean a Refund

June 23, 2026

A new court decision could mean refunds for many taxpayers who paid penalties and interest during the COVID-19 years. The case is Kwong v. United States. It is about how long the IRS had to postpone tax deadlines during the pandemic.

If the court is right, many returns and payments that were treated as “late” were not really late. That means the penalties and interest charged on them should not have been charged at all.

There is a deadline to act. For most people, the window to protect a claim closes on July 10, 2026.

Who this article is for:

1.    Individuals and businesses who paid late-filing penalties, late-payment penalties, estimated-tax penalties, or interest on anything due between 2020 and mid-2023.

2.    Anyone who wants to know whether to file a refund claim, or a protective claim, before the deadline.

What is the Kwong decision?

Kwong is a ruling from the U.S. Court of Federal Claims. It looks at a tax law called Internal Revenue Code § 7508A(d). ⁽¹⁾

That law tells the IRS to automatically push back certain tax deadlines for people affected by a federal disaster. The delay lasts for as long as the disaster is declared, plus 60 more days.

The court said this delay runs for the full length of the disaster. The government argued it should be much shorter. The court disagreed.

How long was the COVID-19 disaster period?

The federal COVID-19 disaster was declared from January 20, 2020 through May 11, 2023.

Add the extra 60 days, and the period runs to July 10, 2023.

That is about three and a half years. It is far longer than the other short disasters this law was written for.

What does this mean for you?

Under the court’s reasoning, any tax deadline that fell between January 20, 2020 and July 10, 2023 was automatically pushed back.

If the deadline was pushed back, the return or payment was not late. And if it was not late, the IRS had no reason to charge a penalty or interest for that time.

One caution: this is just one court’s decision. The IRS does not agree with it, and an appeal is expected. The law is not settled, and a final answer could take years. That is exactly why it is smart to protect your rights now.

What penalties and interest could be refunded?

Under the court’s reasoning, you may be able to get back or wipe out:

•       Penalties for filing or paying late, or for missing estimated-tax payments, during the COVID period;

•       Interest that started building up sooner than it should have; and

•       In some cases, overpayment interest for the 2020-2023 period.

This issue is wide. It can apply to individuals, small businesses, corporations, estates, and trusts. It can also apply to income, employment, estate, gift, and excise taxes. It may even reach late international reporting forms, which carry big penalties even when no tax is owed.

Is there a limit?

Yes. The Kwong decision only covered deadlines that fell during the disaster period. It did not decide what happens to taxes you were already behind on before the disaster started on January 20, 2020.

IRS rules say a taxpayer who was already behind does not get those older penalties and interest erased. ⁽²⁾ Some tax pros read the law more broadly, but that point is still open. For now, the strongest claims are for amounts that came due during the disaster period itself.

What is the deadline to claim?

The IRS usually will not give a refund or remove a charge unless you ask for it.

In most cases, you have three years from the date you filed the return, or two years from the date you paid, whichever is later. For most COVID-era items, that means filing on or before July 10, 2026.

You claim it on Form 843, Claim for Refund and Request for Abatement. ⁽³⁾ Form 843 cannot be filed online. It has to be mailed on paper. The IRS does not confirm it got your claim, so send it by certified mail. That way you can prove you filed on time.

What is a protective claim?

A protective claim holds your place in line while the law is still uncertain. It keeps your right to a refund alive even if the case is not decided until after the normal deadline has passed.

You do not need to know the exact dollar amount. But the claim must:

1.    Name the specific year or years;

2.    Explain what it depends on (here, the result of the Kwong case); and

3.    Be clear enough that the IRS understands what you are claiming.

In practice, that means filing Form 843, writing “Protective Refund Claim Pursuant to Kwong” across the top, and adding as much detail as you can. The IRS usually holds these claims until the case is decided. Then you finish the claim with the final numbers.

If you have an open audit, an Appeals case, or a lawsuit for these years, you may have extra time. Keep this issue in mind as part of your plan.

Practical Action Steps

1.    Get your IRS account transcripts for 2020 through 2023 and look for any penalties or interest charged.

2.    Find out which returns or payments were due between January 20, 2020 and July 10, 2023.

3.    Decide whether to file a refund claim now or a protective claim to hold your place while the case is appealed.

4.    Fill out Form 843 for each year, mark protective claims clearly, and keep copies.

5.    Mail your claims by certified mail before July 10, 2026, and keep the receipt as proof.

6.    Talk with your tax advisor before filing, especially if the amounts are large or your situation is complex.

Consult a Tax Professional

The Kwong decision may or may not survive appeal. No one can promise the outcome. But it costs little to protect your rights now, and missing the deadline is permanent.

If you paid penalties or interest on anything due between January 2020 and July 2023, this is worth a look. We can help you check your transcripts, see if you have a claim, and prepare the paperwork the right way. Please reach out well before the July 10, 2026 deadline so there is time to do it right.

---

This article is for general information and to raise awareness of a changing legal issue. It is not legal or tax advice, and the result will depend on your own facts. Please talk with us about your situation before you act.

Footnotes:

(1) Kwong v. United States, U.S. Court of Federal Claims (2025).

(2) Treas. Reg. § 301.7508A-1.

(3) IRS Form 843, Claim for Refund and Request for Abatement.