Full Breakdown
Court Ruling Revives Pandemic-Era Penalty Refund Claims
5/13/2026, 5:08:36 AM
Court Decision and Claim Deadline
Court of Federal Claims ruled in *Kwong v. United States* (Nov 2023) provision should have covered COVID-19 period, Jan 20, 2020 through July 10, 2023 (plus 60 days). The ruling interprets Section 7508A(d) of the tax code. Penalties and interest for late filing or payment then are deemed improper, and claim deadline of July 10, 2026 was set. IRS disagrees; DOJ to appeal.
Eligibility and Scale
The National Taxpayer Advocate says the IRS must inform taxpayers of their rights even if it disputes *Kwong*. IRS maintains the decision is legally flawed and expects DOJ appeal. Taxpayer Advocate Service warns refunds are not automatic and a protective claim must be filed by July 10, 2026. Any taxpayer with obligations in income, employment, estate, gift or excise taxes—including individuals, small businesses, corporations, estates and trusts—may qualify. IRS data for FY 2023 show over 14.2 million estimated-tax penalties and about 18.6 million failure-to-pay penalties. Accounting professor Nathan Goldman calls the pool “pretty big,” noting a $20,000 tax bill could have added a $5,000 penalty that would be refundable if the ruling stands.
Official Government Positions
National Taxpayer Advocate Erin Collins says the IRS must inform taxpayers of their rights even if it disputes *Kwong*. IRS maintains the decision is legally flawed and expects DOJ appeal. Taxpayer Advocate Service warns refunds are not automatic and a protective claim must be filed by July 10, 2026.
Professional Criticism and Caution
Jon Wasser of Fox Rothschild warns millions could qualify but missing 2026 deadline loses refund/abatement. Victoria Boon of Boon Tax Educators calls it a “largest wave of tax refund claims” but says outcome is unsettled. Goldman advises CPA filing Form 843, noting fee can protect refund.
Filing a Protective Claim
Taxpayers request an IRS transcript to confirm penalties or interest assessed between Jan 20, 2020, and July 11, 2023. A protective claim is filed on Form 843, referencing the *Kwong* decision and Section 7508A(d). The form may cover years if listed and can be submitted or mailed to IRS.
Conflicting Reports & Gaps
The dispute is whether disaster-extension provision applies retroactively to penalties. IRS disagreement and DOJ appeal create uncertainty; no ruling on refunds exists. Agency has not disclosed many claims have filed.
Verbatim Quotes
- “Even if the IRS disagrees with the Kwong decision, I believe it has an obligation to inform taxpayers about their rights, so taxpayers don’t miss the claims deadline if the ultimate resolution of this issue supports their right to the refund or abatement of interest and penalties,” — Erin Collins, National Taxpayer Advocate
- “Millions of taxpayers could be eligible, but if people don’t file claims before July 10, 2026, they lose out on the potential for a refund or abatement,” — Jon Wasser, Partner, Fox Rothschild
- “You’re basically telling the IRS, 'here’s a refund claim, put it on hold for now'” — Jon Wasser, Partner, Fox Rothschild
- “These cases have opened the door to what could become one of the largest waves of tax refund claims in recent years,” — Victoria Boon, Tax Consultant, Boon Tax Educators
- “I would suspect it’s a pretty big number. This happens to millions of people annually,” — Nathan Goldman, Accounting Professor, North Carolina State University
What's Next
DOJ will appeal within weeks; a final opinion may arrive after July 10, 2026. Missing deadline forfeits refund, even if the appeal later favors *Kwong*. Professionals advise monitoring IRS guidance and filing Form 843 promptly.
