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A recent federal court decision, Kwong v. United States, may give some taxpayers a path to request refunds or abatements for IRS penalties and interest assessed during the COVID-19 disaster period.
Some taxpayers may have been penalized for missing deadlines that, under the court’s reasoning, were never actually missed.
The opportunity is not automatic. For many taxpayers, preserving the right to a refund or abatement may require filing a claim with the IRS before July 10, 2026.
What the Kwong case is about
Kwong centers on the federal disaster postponement rules under Internal Revenue Code Section 7508A.
During COVID-19, the federal disaster period began on January 20, 2020. The COVID-19 incident period ended on May 11, 2023. In Kwong, the court held that the automatic postponement period extended through July 10, 2023, which is 60 days after the incident period ended.
If those deadlines were postponed, some penalties and interest tied to those deadlines may have been assessed incorrectly.
In plain English: the IRS may have charged penalties or interest on amounts that you did not actually owe.
Who should review this?
You should review this if the IRS charged you penalties or interest connected to 2019, 2020, 2021, or 2022.
This may include:
- Failure-to-file penalties
- Failure-to-pay penalties
- Estimated tax penalties
- Underpayment interest
- Other IRS penalties assessed during the COVID disaster period
The tax year alone does not answer the question. The real issue is whether the penalty or interest relates to a filing, payment, claim, assessment, or accrual period that overlaps the COVID disaster postponement window.
Your IRS transcript shows what was assessed, when it was assessed, what was paid, and how the IRS coded the account. That is where the analysis starts.
Refund claim or abatement request?
If you already paid the penalty or interest, you may need to file a refund claim.
If the amount is still unpaid, you may need to request an abatement.
For many taxpayers, the relevant form will likely be Form 843, Claim for Refund and Request for Abatement.
Because the Kwong issue may still continue through appeals or further litigation, most taxpayers may need to file a protective refund claim. A protective claim preserves your rights before the statute of limitations expires, even when the final legal outcome or exact refund amount is not fully settled yet.
That claim still needs to be specific. It should identify the taxpayer, affected years, type of penalty or interest, and the basis for the claim. A vague “please review my account” filing is not enough.
July 10 2026 Deadline
For many taxpayers, July 10,2026 may be the key deadline to preserve refund rights.
That date comes from the Kwong timeline. If the COVID disaster postponement period ended on July 10, 2023, then certain refund claim deadlines may extend three years from that date.
That does not mean July 10, 2026 applies to every taxpayer or every claim. Refund deadlines depend on filing dates, payment dates, extensions, tax periods, and the type of claim.
Still, this date should not be ignored.
If you wait until the deadline is close, you may not have enough time to pull transcripts, review the account history, calculate the potential refund or abatement, and prepare the filing correctly.
What to do now
If you paid or still owe IRS penalties or interest tied to the COVID-era tax years, the next step is a transcript review.
A practical review should answer:
- What penalties or interest were assessed?
- When were they assessed?
- Were they paid?
- Which tax years or periods are involved?
- Do the assessment dates overlap with the COVID disaster postponement window?
- Is the refund or abatement claim period still open?
From there, the taxpayer can determine whether Form 843 or another filing is appropriate.
One practical note: Form 843 is generally filed on paper. If you file, use certified mail or another trackable method. Proof of timely mailing matters when deadlines are involved.
What this means for taxpayers
The Kwong decision may create a real refund or abatement opportunity for taxpayers who were charged IRS penalties or interest during the COVID-era disaster period.
But the IRS will not do the work for you.
If you paid or still owe IRS penalties or interest tied to 2019 through 2022 (Or had an installment payment plan or balance due from pre-2019 years), have your transcripts reviewed before the deadline gets close.
Dark Horse CPAs can review your IRS transcripts, identify whether the Kwong issue may apply, calculate the potential refund or abatement, and prepare the appropriate filing before the July 10, 2026 deadline.
FAQs About the Kwong IRS Refund Issue
What is the Kwong IRS refund issue?
The Kwong IRS refund issue comes from a federal court decision involving COVID-19 disaster postponement rules. Under the court’s reasoning, some IRS penalties and interest assessed during the COVID-era disaster period may have been improper.
What tax years could be affected?
The most common years are likely 2019, 2020, 2021, and 2022. The better question is whether the IRS penalty or interest relates to a deadline, assessment, payment, or accrual period that overlaps the COVID disaster postponement window from January 20, 2020 through July 10, 2023.
Is the IRS automatically issuing refunds?
No. Taxpayers should not assume the IRS will automatically identify and refund these amounts. In most cases, a taxpayer will need to file a formal or protective claim.
What form do taxpayers use?
Many taxpayers may need to use Form 843, Claim for Refund and Request for Abatement. The right filing method depends on the taxpayer’s facts, tax type, and whether the penalty or interest has already been paid.
What is the deadline to file a claim?
For many taxpayers, the key protective deadline may be July 10, 2026. The actual deadline can vary based on filing dates, payment dates, tax periods, and claim type.
What if I still owe the IRS penalty or interest?
You may be looking at an abatement request rather than a refund claim. The filing posture is different because you are asking the IRS to remove or reduce an unpaid amount.
Does this apply to state tax penalties?
Not automatically. This issue involves federal disaster postponement rules. State tax penalties and interest need to be reviewed separately.
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