New Court Case May Affect Certain Federal Tax Deadlines
June 5, 2026
A recent federal court decision, Kwong v. United States, may create an opportunity for some taxpayers to seek refunds or other relief for certain IRS penalties and interest connected to the COVID-19 period. In this case, the court sided with Kwong, however the IRS disagrees with and is appealing the court’s decision. As the law and case are still developing, July 10, 2026, may be an important deadline for preserving a taxpayer’s right to claim refunds of applicable penalties and interest.
Why this matters:
During the COVID-19 declared emergency, special disaster-relief rules postponed certain tax deadlines. In Kwong, taxpayers who paid certain penalties and interest – or still have unpaid assessed amounts from that period – may want to review whether relief is available. This issue may apply to a wide range of taxpayers, including individuals, businesses, nonprofit organizations, and trusts/estates.
Importance of July 10, 2026 Deadline:
If the case is upheld, the federally declared COVID-19 disaster period ended July 10, 2023. Accordingly, the three-year statute of limitations for refund claims ends on July 10, 2026. To preserve a taxpayer’s right to claim applicable refunds, a Form 843 “protective claim” should be filed by this date.
Items to review include the following for all return types due between January 20, 2020 and July 10, 2023:
- Taxpayers that incurred failure-to-file, failure-to-pay, or estimated tax penalties
- Taxpayers who paid underpayment interest
- Taxpayers that underwent IRS examinations and paid assessments that included penalties and interest
- Taxpayers whose original due dates preceded January 20, 2020, but whose penalties and interest accrued during the disaster period — these clients may also have partial relief arguments.
- Employment tax matters and information return penalties.
Let us help you:
This is a complex and evolving legal issue. Due to the professional fees involved, complexities in determining the amount of an applicable claim and the uncertainty on whether the case will be upheld on appeal, we are recommending filing the Form 843 protective claim if you incurred IRS penalties and interest of $5,000 or more during the period January 20, 2020 through July 10, 2023. Please contact our office at 410-224-4920 or reach out to your MSWS team member if you believe you may benefit from this case. We are actively reviewing our files and will be reaching out to those clients that we believe may be impacted by this case.
