Resource

Kwong Refund Claims: Eligibility and 2026 Deadline

Cassandra de la Fe, CPA · May 5, 2026

The IRS may owe you money — and the deadline to claim it is July 10, 2026. On November 25, 2025, the U.S. Court of Federal Claims ruled in Kwong v. United States, 179 Fed. Cl. 382, that IRC §7508A(d) automatically postponed federal tax deadlines during the COVID-19 disaster period (January 20, 2020 through July 10, 2023). If you paid failure-to-file penalties, failure-to-pay penalties, or underpayment interest on a return due during that window, those amounts may be refundable. Our Kwong refund claim service can file the protective claim on your behalf before the statute runs.

What the Kwong Ruling Says

Kwong v. United States turned on a single question: is the deadline postponement under IRC §7508A(d) mandatory and self-executing, or does a taxpayer have to request it?

The court said mandatory and self-executing. That distinction matters because the IRS had been treating §7508A(d) relief as something taxpayers had to apply for — and when they didn't, the IRS assessed penalties anyway. The court rejected that interpretation. Under the ruling, the postponement applied automatically to every covered deadline, whether or not the taxpayer asked.

The COVID-19 federal disaster period ran from January 20, 2020 (when the emergency was declared) through May 11, 2023 (when it ended), plus a 60-day grace period that extended to July 10, 2023. Any federal tax obligation with a due date inside that window was subject to mandatory postponement. Penalties assessed on those obligations were assessed in error.

The National Taxpayer Advocate's April 2026 blog post estimates that tens of millions of taxpayers may qualify, with billions of dollars in penalties potentially subject to refund.

Who Is Affected

Any taxpayer who paid federal failure-to-file penalties, failure-to-pay penalties, underpayment interest, or estimated-tax penalties on a return due between January 20, 2020 and July 10, 2023 may be eligible. That includes individuals, self-employed taxpayers, S-corporations, partnerships, C-corporations, and sole proprietors. U.S. citizens living abroad with federal filing obligations during the disaster window are also included — payment plan and installment-agreement payments count as well.

The Journal of Accountancy's May 2026 analysis confirmed the ruling's scope extends across entity types, not just individual filers.

The Three Penalty Types in Scope

Most Kwong refund claims fall into three categories.

Failure-to-file penalty (IRC §6651(a)(1)). This penalty runs at 5% of unpaid tax per month, capped at 25%. It applies when a return is filed after its due date. If your 2020 return was due April 15, 2021 — a date inside the COVID disaster window — any failure-to-file penalty assessed on that return is a candidate for refund.

Failure-to-pay penalty (IRC §6651(a)(2)). This runs at 0.5% of unpaid tax per month, also capped at 25%. It often runs alongside the failure-to-file penalty (with rates offset when both apply). Because it accrues from the payment due date rather than the filing due date, it captures even more of the disaster period in some cases.

Underpayment interest (IRC §6601). Interest runs at the federal short-term rate plus 3%, compounding daily. For taxpayers who carried balances through 2020–2022, this is often the largest single item on a CP14 or CP501 notice.

Estimated-tax penalties under IRC §6654 (individuals) and §6655 (corporations) are also covered. Many filers miss this category because the quarterly amounts are smaller — but they add up across the eight or more quarters of the disaster period.

Morgan Lewis's April 2026 analysis confirmed that all three penalty types are substantively affected by the ruling, not just the failure-to-file penalty as some early coverage suggested.

The July 10, 2026 Deadline

IRC §6511(a) gives taxpayers three years from the date of payment to file a refund claim. For most COVID-era penalties, that three-year window closes on July 10, 2026 — the same date the disaster postponement period ended.

After July 10, 2026, the IRS can refuse to process a Form 843 refund claim even if the Kwong ruling is upheld on appeal. The deadline is statutory. There is no hardship extension, no CPA exception, and no way to preserve your claim after it passes.

The DOJ has indicated it will appeal the Kwong ruling. That is precisely why filing a protective claim now is the right move: a timely protective claim keeps your rights intact regardless of how the appeal resolves. If the IRS wins the appeal, the claim is denied. If the ruling is upheld, your claim is already on the record.

How a Protective Claim Works

A protective refund claim (Form 843, "Claim for Refund and Request for Abatement") asks the IRS to return the penalties and interest it collected in excess of what was legally owed. The form is a paper-only IRS filing — no e-file option exists.

A Kwong claim requires specific language across the top of the form: "Protective Refund Claim Pursuant to Kwong v. United States." It must also include a complete explanation of how IRC §7508A(d) applies to your situation, the calculated claim amount broken out by penalty type, and proof of timely mailing under IRC §7502 (USPS certified mail with return receipt).

The IRS Form 843 instructions are explicit: one form per tax year, one penalty type per claim. A filer with penalties in 2020, 2021, and 2022 needs three separate Form 843 filings.

The AICPA resource center on Kwong v. United States notes that errors in the protective-claim language are among the most common reasons the IRS rejects these filings.

For a worked example showing how to calculate your claim amount, see our companion post: How to Estimate Your Kwong Refund Amount.

What to Do If You Think You Qualify

Gather your IRS notices — specifically CP14, CP501, or any notice showing a penalty or interest assessment for returns due between 2020 and 2023. If you don't have them, order Account Transcripts via IRS Online Account or Form 4506-T. Add up the penalty and interest line items (not the underlying tax — that was always owed). That total is your potential claim amount.

Form 843 is a public IRS form. But a Kwong protective claim requires specific legal language, an accurate calculation, and certified-mail submission by July 10, 2026. Errors in any of those elements can result in denial.

Our Kwong refund claim service starts with a free 10-minute eligibility screen. If you qualify, a Florida-licensed CPA prepares each Form 843 with the required protective language and files by certified mail with tracking. The statute of limitations does not move.

Sources