Important Client Alert: Recent Court Decision May Unlock COVID-Era Refunds—Action Required Before July 10, 2026

The Kwong decision could affect individuals, businesses, and nonprofit organizations.

By Cory Barlett

A recent court decision may create a time-sensitive opportunity for taxpayers to recover penalties and interest paid during the COVID-19 pandemic. The ruling in Kwong v. United States adopts a broader interpretation of pandemic-related tax deadline relief that could directly affect millions of taxpayers.

Relief will not be automatic and taxpayers must proactively preserve their rights before a window closes in July. 

What Changed Under the Kwong Decision

In Kwong v. United States, the U.S. Court of Federal Claims held that federal tax deadlines were automatically postponed for the full duration of the COVID-19 federal disaster period, plus an additional 60 days.  Many IRS calculations failed to properly address this complete postponement. 

Under that interpretation, the relief period runs from January 20, 2020 through July 10, 2023, which is significantly broader than most IRS guidance. As a result, filings or payments that were previously treated as late may now be considered timely and previous calculations may not capture this relief.

What This Means for Taxpayers

If this interpretation stands, many taxpayers may have a basis to recover amounts previously paid to the IRS. Potential opportunities may include:

• Refunds of failure-to-file penalties
• Refunds of failure-to-pay penalties (including untimely estimated payments)
• Recovery of underpayment interest
• Claims for interest related to delayed refunds

For example, a business that paid failure-to-pay penalties in 2021 may now be eligible to seek a refund if those payments fall within the expanded relief window.

Who Should Evaluate This Opportunity

Review this opportunity if you:

• Had federal tax filing or payment obligations between January 2020 and July 2023
• Paid penalties or interest during that same time period
• Filed tax returns late or entered into payment arrangements
• Operate a business, nonprofit, or complex tax structure
• Have international filing requirements or complex reporting obligations

Many taxpayers could qualify for relief, and this does not depend on unusual facts.

Why Acting Now Is Critical

To preserve eligibility for potential relief, taxpayers must file a refund claim by July 10, 2026.

This deadline reflects the extended statute of limitations tied to the court's interpretation of pandemic-related postponements. Missing this deadline could eliminate the opportunity entirely, even if future rulings ultimately favor taxpayers.

The IRS may challenge or appeal the decision, and the IRS claims process may require technical documentation and follow-up. Taxpayers should consider filing protective refund claims now while the legal landscape continues to develop.

Take the Next Step

Taxpayers affected by the Kwong decision should review their position promptly and decide whether the filing of a protective claim before the July 10, 2026 deadline is warranted. Waiting could limit or eliminate the opportunity to seek relief.

Boyer & Ritter can assist clients with reviewing prior-year filings and IRS transcripts, identifying penalties and interest that may support a claim under Kwong, and preparing protective refund or abatement claims when needed. Contact your Boyer & Ritter advisor if you would like to discuss your circumstances.

Cory Barlett is a Senior Tax Associate at Boyer & Ritter, where he advises clients on tax compliance and planning matters. He works with businesses and individuals on complex tax issues and can be reached at cbarlett@cpabr.com.