Could You Be Entitled to an IRS Refund? What Taxpayers Should Know About the Kwong Decision

A recent federal court decision in Kwong v. United States has raised important questions about IRS filing and payment deadlines during the COVID-19 national disaster period. While the case is still under appeal, it has created a potential refund opportunity for some taxpayers who paid IRS penalties or interest during that time.

Although the final outcome remains uncertain, taxpayers who may be affected should understand how the case could impact their rights and why timely action is important.

What Is the Kwong Case?

The Court of Federal Claims concluded that certain federal tax deadlines may have been automatically postponed during the COVID-19 disaster declaration under Internal Revenue Code Section 7508A. If that interpretation is ultimately upheld, some taxpayers may be entitled to refunds of penalties, interest, or other tax amounts that were assessed during the disaster period.

The government has appealed the decision, so no refunds are guaranteed at this time.

Who May Be Affected?

You may want to review your tax records if you:

• Paid IRS penalties for filing or paying taxes late during the COVID-19 disaster period.

• Paid interest on tax balances that may have been affected by the disputed deadlines.

• Missed filing a refund claim because you believed the statute of limitations had expired.

• Filed returns or made payments during the COVID emergency period and incurred additional IRS charges.

Why Timing Matters

One of the key lessons from the Kwong case is that tax refund opportunities are often governed by strict statutes of limitation.

In many situations, taxpayers were encouraged to file a protective refund claim to preserve their rights while the litigation continues. A protective claim does not guarantee a refund—it simply keeps the claim alive until the courts reach a final decision.

Planning Considerations

If you believe you were affected, consider the following steps:

• Review IRS account transcripts for penalties and interest assessed during the COVID disaster period.

• Determine whether you previously filed or may need to file a refund or protective claim.

• Retain documentation supporting your payments and filing history.

• Consult your CPA before assuming you qualify for a refund, as eligibility depends on your individual facts and the final outcome of the litigation.

Bottom Line

The Kwong decision highlights how changes in tax law and court rulings can create unexpected planning opportunities. While the case is not yet final, taxpayers who paid COVID-era IRS penalties or interest should review their circumstances with a qualified tax advisor to determine whether additional action is appropriate.

IRS & Government Resources

• IRS Form 843 – Claim for Refund and Request for Abatement

• IRS Online Account

• IRS Disaster Tax Relief Guidance

• Taxpayer Advocate Service – COVID-19 Disaster Relief Refund Guidance

Additional Resources

• AICPA – Kwong v. United States FAQs

• Journal of Accountancy – COVID-Era Refund Claim Developments

• Taxpayer Advocate Service – Beyond Penalties and Interest: How Kwong May Affect Missed Refund Claims

Need Assistance?

At NE Business Advisors, we help individuals and businesses stay ahead of changing tax laws and identify opportunities to reduce taxes while remaining compliant. If you have questions about COVID-era penalties, refund claims, or other tax planning strategies, we're here to help.