A Court Just Ruled the IRS Got COVID-Era Tax Deadlines Wrong

Written By Lucas Laudick

Tax Law Update  ·  Time-Sensitive

A Court Just Ruled the IRS Got
COVID-Era Tax Deadlines Wrong

If you paid penalties or interest on tax liabilities between January 2020 and July 2023, a recent federal court decision may mean you're owed a refund — but the window to claim it is closing.

By Latitude Tax Advisors  ·  8 min read  ·  Tax Strategy

Most court decisions affecting tax law stay buried in legal publications and never reach the business owners who are actually affected. Kwong v. United States, 179 Fed. Cl. 382, decided by the U.S. Court of Federal Claims on November 25, 2025, is one that deserves your attention — particularly if your business carried any tax liabilities, paid penalties, or accrued interest during the COVID-19 emergency period.

The court's ruling is straightforward in concept but significant in consequence: the IRS interpreted its own COVID-era relief too narrowly. The statute required a much broader postponement of tax deadlines than what the agency actually offered — and taxpayers who paid penalties or interest based on those incorrect deadlines may have strong grounds to get that money back.

The Background

What Is §7508A and Why Does It Matter?

IRC §7508A gives the IRS authority to postpone tax deadlines when the President declares a federal disaster. Congress amended the provision in 2019 to make clear that the postponement applies for the full duration of the declared disaster period, plus an additional 60 days — not just for whatever shorter window the IRS chooses to announce.

When COVID-19 hit, President Trump declared a nationwide emergency beginning January 20, 2020. That emergency remained in effect until May 11, 2023. Adding the required 60 days, the court in Kwong concluded that the §7508A postponement period extended through July 10, 2023.

Start
Jan. 20, 2020
COVID-19 national emergency declared
→
End
July 10, 2023
Emergency end + 60 days required by statute

Here's the problem: the IRS never offered relief anywhere close to that broad. The most notable COVID relief the IRS announced was pushing the April 15, 2020 filing and payment deadline to July 15, 2020 — a 90-day extension. After that, business largely returned to normal deadlines, and the IRS began assessing penalties and interest accordingly.

The court in Kwong ruled that the IRS got it wrong. The scope of the postponement is governed by the statute Congress passed — not by whatever administrative relief the IRS chose to announce. If the statute required deadlines to be extended through July 10, 2023, then penalties and interest calculated against earlier due dates may not have been legally justified.

"The court's message is clear: Congress wrote the relief into the statute, and the IRS cannot narrow it through administrative guidance. What the IRS announced during COVID was a floor, not a ceiling."

Who May Be Affected

Three Groups of Taxpayers May Have Claims

The Kwong decision potentially affects three distinct groups — and you may fall into more than one.

Group 1  ·  Taxpayers Who Paid Penalties
If you were assessed a failure-to-file, failure-to-pay, or estimated tax penalty (§6654 or §6655) tied to a deadline that fell between January 20, 2020 and July 10, 2023, those penalties may have been improperly imposed. This also includes information return penalties — such as those related to foreign entity reporting on Forms 5471 and 5472 — assessed during the same window. The argument under Kwong is that the underlying due date was automatically postponed by statute, making the penalty calculation based on an incorrect date.
Group 2  ·  Taxpayers Who Paid Interest on COVID-Period Liabilities
Interest on unpaid taxes begins accruing from the original due date. If that due date should have been postponed under §7508A — as Kwong suggests — then the interest clock may have started running too early. This is particularly significant for taxpayers who paid 2019–2021 balances over time, carried installment agreements with meaningful interest, or had liabilities that accrued over several years. The overstated interest may be recoverable as a refund or abatement.
Group 3  ·  Taxpayers With Denied or Time-Barred Refund Claims
Refund claims are subject to strict timing rules under §6511 — generally three years from the filing of the return or two years from payment, whichever is later. If those deadlines fell within the COVID emergency window, Kwong supports the position that the deadlines were extended under §7508A. This means claims previously denied as untimely may actually have been timely, dismissed refund suits may still be viable, and taxpayers who never filed because they believed time had run out may now have an opportunity to do so.
⚠ Important Context

Kwong is not the final word. The IRS is expected to resist broad application of this ruling, and further litigation is anticipated. That said, the decision is grounded in the plain text of a statute Congress passed — not a regulatory interpretation — which gives it meaningful weight. Several taxpayers have already begun pursuing claims on this basis.

Does This Apply to You?

How to Evaluate Your Situation

Start by asking whether any of these describe your tax history from 2019 through 2022:

Situations Worth a Closer Look
✓You were assessed a late-filing or late-payment penalty for any tax year from 2019 through 2022
✓You paid estimated tax penalties under §6654 (individuals) or §6655 (corporations) during the COVID window
✓You entered an installment agreement and paid significant interest on balances tied to 2019–2021 tax years
✓You received penalties for information returns (Forms 5471, 5472, or similar) filed during the emergency period
✓You had a refund claim denied as untimely where the relevant deadline fell during the COVID emergency window
✓You didn't file an amended return because you believed the statute of limitations had already expired

If any of these apply, the next step is a fact-specific analysis — identifying the exact payments and deadlines at issue, calculating what the postponed due dates would have been under a correct §7508A reading, and determining whether the difference results in a recoverable amount.

⚑ Time Is the Critical Factor

Refund claims are governed by the statute of limitations under §6511 — generally two years from payment or three years from the filing of the return. For many COVID-period payments, those windows are actively expiring right now. A protective claim can be filed to preserve your rights while the legal landscape around Kwong continues to develop — but only if it's filed before the deadline passes.

What to Do

Recommended Next Steps

1
Pull your IRS transcripts for tax years 2019 through 2022 IRS Account Transcripts (available via Form 4506-T or your IRS online account) will show every penalty and interest assessment, the dates they were imposed, and the due dates the IRS used as the basis for calculation.
2
Identify any penalties or interest tied to COVID-window deadlines Flag any assessment where the underlying due date fell between January 20, 2020 and July 10, 2023 — including filing and payment deadlines, estimated tax due dates, and information return deadlines.
3
Evaluate whether a protective claim makes sense A protective claim preserves your right to a refund while the underlying legal question is still being litigated. It's a relatively low-cost step that keeps your options open — and given that §6511 deadlines are actively expiring, it's time-sensitive.
4
Don't wait for the IRS to act on its own The IRS is not proactively reviewing accounts for Kwong-based refunds. If this applies to you, the burden is on you to identify the exposure, prepare the claim, and file it within the applicable window.

"The IRS collected penalties and interest during COVID based on deadlines that a federal court has now said were wrong. That's worth checking — especially because the window to recover those amounts won't stay open indefinitely."

The Bottom Line

Kwong v. United States is a meaningful decision because it's grounded in what Congress actually wrote — not in an IRS policy position the agency can simply walk back. The court found that §7508A required a far longer postponement of tax deadlines than the IRS provided, and that penalties and interest imposed against shorter deadlines may not have been legally justified.

For small business owners who paid penalties or carried installment agreements during the COVID period, this is worth a serious look. The amounts at issue may be small for some taxpayers and significant for others — but the only way to know is to pull the records and run the analysis.

If you'd like us to review your COVID-period tax history for potential Kwong exposure, we're happy to take a look. A brief conversation is usually enough to tell us whether a deeper analysis is warranted — and whether filing a protective claim makes sense for your situation.

This article is for informational purposes only and does not constitute legal or tax advice. Kwong v. United States, 179 Fed. Cl. 382 (Nov. 25, 2025), is a single court decision that has not been affirmed on appeal, and the IRS is expected to contest its broad application. The analysis of whether any refund or abatement claim is viable is highly fact-specific and depends on the applicable statute of limitations under §6511. Consult a qualified CPA or tax attorney before filing any claim based on this decision.

Lucas Laudick
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