Could the IRS Owe You Money? A Recent Court Case May Open the Door to Refund Opportunities
A recent federal court decision is creating significant discussion throughout the tax community—and it may present an opportunity for some taxpayers to recover penalties and interest paid to the IRS during the COVID-19 pandemic.
The case, Kwong v. United States, centers around how federal tax deadlines should have been treated during the COVID-19 disaster declaration period. The court ruled that certain tax deadlines may have been automatically postponed for a much longer period than the IRS previously recognized.
If the decision ultimately stands, some taxpayers who paid IRS penalties or interest during the pandemic years could be entitled to refunds.
What Is the Kwong Case?
In Kwong v. United States, the U.S. Court of Federal Claims determined that federal tax deadlines may have been suspended during the COVID-19 national disaster period—from January 20, 2020, through July 10, 2023.
The ruling suggests that certain penalties and interest assessed during that timeframe may have been charged improperly. As a result, individuals and businesses who paid those amounts may have grounds to request a refund or abatement.
Who Could Potentially Benefit?
You may want to review your situation if you:
- Paid IRS failure-to-file penalties
- Paid IRS failure-to-pay penalties
- Paid estimated tax penalties
- Paid interest related to those penalties
- Had IRS collection activity during the COVID-19 period
- Operated a business that experienced tax payment challenges between 2020 and 2023
Both individuals and businesses may potentially be affected.
Why Timing Matters
While the case is still being appealed, many tax professionals are encouraging eligible taxpayers to consider filing a “protective claim” to preserve their rights while the courts continue to review the issue.
For many taxpayers, an important deadline may be approaching on July 10, 2026. Missing that deadline could mean losing the opportunity to pursue a refund if the courts ultimately uphold the decision.
What Should You Do Next?
Every taxpayer’s situation is different, and not everyone will qualify for a refund. Determining eligibility requires reviewing IRS transcripts, penalty assessments, payment history, and applicable filing deadlines.
If you believe you may have paid IRS penalties or interest between 2020 and 2023, now is a good time to evaluate your options.
How ClearPoint CPAs Can Help
Our team can help you:
- Review your IRS account history
- Determine whether you may be impacted by the Kwong decision
- Evaluate potential refund opportunities
- Assist with any necessary filings and documentation
- Monitor ongoing developments as the case progresses through the courts
If you would like to discuss whether this opportunity may apply to you or your business, contact ClearPoint CPAs today. We’ll help you understand your options and determine the most appropriate next steps.
