By Shannon Christensen, J.D., MBT
April 22, 2026
A Major Taxpayer Victory — Kwong v. U.S.
In a significant taxpayer victory, the U.S. Court of Federal Claims in Kwong v. U.S. (11/2025) delivered a broad interpretation of disaster relief provisions for taxpayers affected by the COVID19 pandemic. The court acknowledged the practical reality that during a federally declared disaster, taxpayers are rightfully focused on personal safety and reestablishing their lives and businesses, making tax compliance a secondary concern. The court held that the version of IRC Sec. 7508A in effect during the pandemic tolled certain statutory tax deadlines for the entirety of the federally declared disaster period, plus the statutorily mandated 60 days resulting in an automatic postponement period that began on 1/20/20 and ended on 7/10/23.
The Window Is Closing — Act Before 7/10/26
The Kwong decision creates an opportunity for taxpayers who were charged penalties or interest between 1/20/20 and 7/10/23. During this multiyear COVID19 disaster period, penalties and interest charges should not have accrued on missed filing deadlines. Taxpayers who were assessed these amounts but have not paid them can request an abatement. For those who did pay, a refund is possible, but practitioners must act quickly.
Any claim for refund related to the COVID19 pandemic disaster, including claims related to the Employee Retention Credit (ERC), must be filed within three years from the legally recognized deadline of 7/10/23. This means the final day to submit claims to the IRS is 7/10/26. Claims for refund and requests for abatement are filed using Form 843.
If the ruling is appealed, submitting a protective claim before the expiration of the statute of limitations will preserve the claim in the event subsequent appellate decisions modify the Court of Federal Claims’ interpretation. Do not wait for the IRS’s appeal to be resolved file now to protect your clients’ rights.
Background: The Kwong Case
The case involved Mr. Terry Kwong, who filed suit in February 2023 seeking a refund for penalties related to his 2007, 2010, and 2011 tax years. The IRS had issued notices disallowing his claims in September and October 2020. Ordinarily, his suit would have been untimely as it was filed more than two years after the disallowance notices. However, Mr. Kwong argued that his deadline was postponed under the automatic relief provision of IRC Sec. 7508A due to the COVID19 pandemic.
The disaster declaration for California, where Mr. Kwong resided, stated the disaster was “beginning on 1/20/20, and continuing.” The declaration was later amended to establish a formal end to the incident period on 5/11/23. The court’s decision hinged on the plain language of the 2019 Congressional amendment of Sec. 7508A(d), where the period of postponement began “on the earliest incident date” and ended “on the date which is 60 days after the latest incident date.” This extended Mr. Kwong’s deadline to file suit to 7/10/23, making his February 2023 filing timely.
The government argued that the IRS retained interpretive discretion and that the pandemic related relief already provided reflected the appropriate scope of postponement. According to IRS regulations there should be a one-year limitation on the mandatory postponement period. The court rejected that position, reasoning that administrative guidance cannot narrow a statutory suspension that Congress framed as mandatory. Congress never stipulated a one-year limitation in the statute. Relying on the Supreme Court’s recent decision in Loper Bright Enterprises, the court asserted its authority to exercise independent judgment rather than deferring to the IRS’s own interpretations. The Kwong decision draws a clear line: when it comes to disaster relief, the plain language of the law passed by Congress has the final say over the IRS’s own regulations.
Broader Implications: Penalties, Interest, and Time-Sensitive Acts
The scope of this holding goes well beyond simply extending filing deadlines. The court recognized that the postponement period in Sec. 7508A also applies to “any” tax liability, as stated in Sec. 7508A(a)(2), which includes the accrual of interest, penalties, and additional amounts or additions to tax. Because Sec. 7508A applies to certain federal tax filing or payment deadlines falling within the postponement period, this decision has far reaching implications for penalty and interest assessments affecting income and employment tax returns.
The IRS computes underpayment interest and/or failure-to-file/pay penalties from the payment due date, thus penalties should not accrue from 1/20/20 through 7/10/23, and any taxpayers who already paid these amounts may be entitled to a refund. This refund opportunity may apply to underpayment interest and/or penalties paid with respect to federal income, estate, gift, employment, or excise taxes.
This reading of the law potentially reopens the door to refund claims and abatement requests once thought to be lost not only for untimely filings, but also for interest and penalties that were incorrectly calculated against deadlines the law had already extended.
Other Time-Sensitive Acts to Consider
Rev. Proc. 2018-58 provides the most comprehensive list of “time-sensitive tax acts” under IRC Sec. 7508A for taxpayers affected by federally declared disasters. Time-sensitive acts are not limited to tax return filings and payments. Common examples granted relief during disaster declaration periods include:
- Filing Tax Court petitions
- Suits for refund
- Claims for credit or refunds
- Making retirement and pension fund contributions
- Like-kind exchanges
- Involuntary conversions
- Responding to IRS notices
- Making business elections, such as the S corporation election
The court’s conclusion that statutory deadlines were postponed during COVID-19 may have implications for certain tax consequences that depend on a filing date or deadline, including failure-to-file and failure-to-pay penalties and other deadlines such as electing portability on an Estate Tax Return (Form 706). Practitioners should carefully consider whether any other IRS deemed-late filings for their clients may now benefit from the extended disaster relief period established in Kwong.
Important Limitations: The Law Has Since Changed
Practitioners must understand that the holding in Kwong applies only to a specific version of IRC Sec. 7508A. Congress has since amended the statute twice, effectively narrowing the relief provision that produced the multiyear extension.
First, the Infrastructure Investment and Jobs Act (P.L. 11758), enacted 11/2021, changed the calculation of the mandatory postponement period. Although Congress amended Sec. 7508A(d) in November 2021 to change how the end of the postponement period is calculated, the court explained that this amendment does not apply retroactively. For disasters declared after enactment, the postponement ends 60 days after the later of (i) the earliest incident date or (ii) the declaration date, preventing a “continuing” disaster from creating an open-ended extension.
Second, the 2025 Filing Relief for Natural Disasters Act (P.L. 11929) further amended the statute for declarations made after 7/24/25, expanding federal tax relief beyond presidentially declared disasters to include severe disasters at the local or regional level. Governors may now request that the IRS, in consultation with FEMA, apply federal tax time-sensitive extensions to state-declared disasters. This act also extended the automatic postponement and mandatory suspension period from 60 days to 120 days.
Finally, the Disaster Related Extension of Deadlines Act (P.L. 11964), enacted 12/26/25, requires the IRS to treat the postponement of a federal tax return deadline due to a federally declared disaster as an extension of such deadline for purposes of making a refund claim, directly affecting the refund lookback period under IRC Sec. 6511.
Note: The triggering date for disaster relief is not the date of the disaster itself, rather it’s the declaration date providing relief by the President (or IRS/FEMA).
A Caution on Appeal
The IRS is widely expected to appeal the Kwong decision. The outcome is not yet final, which makes filing a protective claim before 7/10/26 all the more critical. Filing a protective claim “freezes” the statute of limitations for your client’s specific account. By filing now, you ensure that if the Kwong ruling is upheld by higher courts, your client will remain eligible for a refund even if the standard processing window expires while the appeal is pending.
The Bottom Line for Practitioners
The Kwong decision is a significant victory for taxpayers, affirming the public policy that disaster relief rules should provide practical and fair relief to victims. The court acknowledged the real-world challenges faced during the COVID-19 pandemic and ruled that the disaster declaration triggered an automatic, multi-year postponement of key tax deadlines. By prioritizing the plain language of the law, the holding signals that the relief intended by Congress was not to be improperly limited by restrictive IRS rules.
Conclusion
Practitioners should review client tax transcripts to identify interest and/or penalty assessments tied to the postponement period under the court’s analysis. Affected taxpayers should consider filing a request for interest and/or penalty abatement via Form 843, Claim for Refund and Request for Abatement. Claims that were once written off as time-barred may now be worth a second look, but only if you act before 7/10/26.
Editor’s Note: The full article presented above is available in the Practitioner’s Tax Action Bulletin, as National Tax Advisory Memo (NTA1352), first published in , along with other valuable tax practitioner articles. Contact Our Sales Team for a Subscription to Checkpoint’s bimonthly Practitioner’s Tax Action Bulletin, which is available in print, and online or to add Thomson Reuters Planner CS to your advisory toolkit.
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