INSIGHTS
Could You Be Eligible for a Refund of COVID-Era IRS Penalties?
by Larson Gross
ARTICLE | June 05, 2026
If you paid or were assessed IRS penalties or interest during the COVID-era period, a recent federal court decision may be worth reviewing.
The case, Kwong v. United States, raises an important question: could certain federal tax deadlines have been postponed for the full COVID-19 emergency period, plus an additional 60 days? If so, some taxpayers may have been assessed penalties or interest that could potentially be refunded or abated.
At Larson Gross, we’re monitoring this issue closely. Refunds are not automatic, and the rules are still developing, but some taxpayers may want to review their records now.
What happened in the Kwong case?
In Kwong, the IRS had denied a taxpayer’s refund claims during the COVID-19 pandemic. Under normal rules, the taxpayer had two years to file a lawsuit challenging the denial. The government argued the taxpayer filed too late.
The U.S. Court of Federal Claims sided with the taxpayer, holding that certain federal tax deadlines were automatically postponed during the COVID-19 disaster period under Internal Revenue Code Section 7508A(d).
The federal COVID-19 emergency began on January 20, 2020, and ended on May 11, 2023. With the additional 60-day period, the court treated the relevant deadline as postponed through July 10, 2023.
Why does this matter?
Although Kwong involved the deadline to file a refund lawsuit, the court’s reasoning may have broader implications.
If certain filing or payment deadlines were legally postponed, then some penalties or interest assessed for missing those deadlines may need to be reviewed. This could include penalties related to late filing, late payment, missed estimated tax payments, or certain late-filed information returns.
This does not mean every penalty or interest charge from 2020 through 2023 qualifies. Eligibility depends on the specific tax year, deadline, penalty type, filing and payment history, assessment date, payment date, and whether a timely claim is filed.
Why does July 10, 2026 matter?
Many refund claims have strict filing deadlines. Because July 10, 2023, may be treated as the postponed deadline for certain COVID-era tax obligations, many tax professionals are treating July 10, 2026, as an important date for filing protective refund claims.
Filing before that date may help preserve a taxpayer’s right to a possible refund while the legal issue continues to develop.
Who should take a closer look?
This may be worth reviewing if you were assessed or paid significant IRS penalties or interest during the COVID-era period, including penalties or interest tied to:
- Late-filed federal tax returns;
- Late-paid federal tax balances;
- Missed estimated tax payments;
- Certain late-filed information returns;
- IRS notices, audits, payment plans, or collection activity; or
- Amended returns or Employee Retention Credit-related tax adjustments.
This review may be especially important for newer Larson Gross clients, because we may not have visibility into penalties or interest assessed before we began working together
What is a protective claim?
A protective claim is a formal filing with the IRS that preserves a possible refund right while a legal issue is still being resolved.
For this issue, the likely filing method is IRS Form 843, Claim for Refund and Request for Abatement. Filing Form 843 does not guarantee a refund. Instead, it puts the IRS on notice that the taxpayer is requesting a refund or abatement of penalties and related interest if the Kwong interpretation ultimately applies.
After a claim is filed, the IRS may review it, request more information, allow it, deny it, or hold it while related legal developments continue.
What should you do now?
If you paid or were assessed significant IRS penalties or interest during the COVID-era period, now is a good time to review your IRS notices, account transcripts, filing dates, payment dates, and penalty assessments.
This issue is still developing, and the IRS may continue to challenge or limit the impact of the decision. Be cautious of anyone guaranteeing a refund.
Larson Gross is monitoring developments and evaluating how this may affect our clients. Reach out to your tax advisor if you think this may apply to you.
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Teresa Durbin CPA
Manager, Larson Gross Advisors
Teresa Durbin has been helping businesses and individuals navigate complex tax matters since joining Larson Gross in 2009. She specializes in federal and state tax planning, compliance, and IRS correspondence, advising clients on tax notices, examinations, and resolution strategies. Teresa combines deep technical expertise with a practical approach to help clients respond confidently to evolving tax regulations and IRS requirements.
Teresa holds a bachelor’s degree in Business Administration with a major in Accounting from The Master’s University.