If you paid IRS penalties or interest during the pandemic years, a recent federal court decision may create a potential refund opportunity for certain taxpayers.

The case, Kwong v. United States, centers on how federal disaster relief rules applied during the COVID-19 pandemic and whether certain IRS penalties and interest were properly assessed during a period when tax deadlines had been postponed. While the case remains under appeal, taxpayers who may be affected should understand the potential opportunity and the applicable deadlines for preserving their rights.

The Background

During the COVID-19 pandemic, a federal disaster declaration was in effect from January 20, 2020, through May 11, 2023. The court determined that certain tax deadlines were postponed during this disaster period and that this postponement may affect the validity of some IRS penalties and interest assessments made during that time.

Because the litigation is ongoing, the ultimate scope and impact of the ruling remain uncertain.

Could You Be Eligible for Relief?

If the court’s decision is ultimately upheld, some taxpayers may be eligible for refunds or reductions related to:

• Failure-to-file penalties
• Failure-to-pay penalties
• Estimated tax (underpayment) penalties
• Certain underpayment interest charges
• International information return penalties, including penalties associated with Forms 5471 and 3520

Eligibility will depend entirely on individual circumstances and the specific penalties assessed during the applicable period.

Why Timing Matters

Although the case continues through the appeals process, taxpayers should be aware that refund claim deadlines may apply. To preserve potential rights while litigation remains unresolved, some taxpayers may consider filing a Protective Claim for Refund using IRS Form 843.

For many taxpayers, the critical deadline to file a protective claim may be July 10, 2026. Filing deadlines can vary depending on individual circumstances, so it is important to review your specific situation carefully.

A protective claim does not guarantee a refund. Rather, it preserves a taxpayer’s ability to pursue a refund if future court decisions ultimately support such claims. Missing an applicable filing deadline could significantly limit a taxpayer’s ability to pursue a future refund claim.

Recommended Next Steps

Taxpayers who believe they may have been affected should consider reviewing their IRS accounts and penalty history as soon as possible. Potential steps include:

• Reviewing IRS account transcripts from the pandemic period
• Identifying penalties and interest assessed during the applicable timeframe
• Evaluating whether a Protective Claim for Refund may be appropriate
• Maintaining documentation supporting any future claim

How PSA CPA Can Help

Every taxpayer’s situation is different, and the ongoing litigation makes careful review especially important.

PSA CPA can review your IRS account transcripts from the pandemic years, evaluate your potential eligibility, and determine whether filing a Protective Claim may be appropriate before any applicable deadlines.

If you believe you may have been affected by pandemic-era IRS penalties or interest assessments, contact PSA CPA to discuss your situation before the July 10, 2026 deadline.

Call Us: (301) 879-0600

Email Us: contact@psacpa.com

Because the IRS continues to appeal this decision, the outcome of the litigation remains uncertain, and future court rulings may affect taxpayer eligibility and available relief.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice.