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How to Estimate Your Kwong Refund Amount

Cassandra de la Fe, CPA · May 8, 2026

The Kwong v. United States ruling (179 Fed. Cl. 382, Nov. 25, 2025) established that IRC §7508A(d) automatically postponed every federal tax deadline during the COVID-19 disaster period — no taxpayer request required. If you paid IRS penalties or interest on returns due between January 20, 2020 and July 10, 2023, some or all of those payments may be refundable. This post explains which penalty types qualify, how the refund math works, and the most common mistakes people make when estimating their amount. If you want a CPA to run the numbers, our Kwong refund claim service includes a free eligibility screen.

What Kwong Refunds Cover

The ruling affects penalties and interest that arose because a deadline fell inside the COVID disaster window. The key phrase in IRC §7508A(d) is "mandatory postponement" — the IRS was required by statute to extend those deadlines, even if it did not do so in practice. When the IRS collected penalties on those obligations anyway, it collected amounts it was not authorized to collect.

A refund claim under Form 843 ("Claim for Refund and Request for Abatement") asks the IRS to return what it collected in excess of what was legally owed.

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 claims.

The Three Penalty Types Affected

Most Kwong claims fall into three buckets. Each appears on different IRS notices, and each is calculated differently.

Failure-to-file penalty (IRC §6651(a)(1)). This is 5% of unpaid tax per month, capped at 25%. It runs from the original due date of the return. If your 2020 return was due April 15, 2021 — which fell 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 is 0.5% of unpaid tax per month, also capped at 25%. It often runs concurrently with the failure-to-file penalty, though the rates are offset when both apply. Because it runs from the payment due date (not the filing due date), more months of the COVID period may be captured.

Underpayment interest (IRC §6601). This is the federal short-term rate plus 3%, compounding daily. Interest is often the largest single item on a CP14 or CP501 notice, particularly for taxpayers who owed significant balances during 2020–2022 when balances aged for months without payment.

Morgan Lewis analyzed the §7508A aftermath and confirmed that all three penalty types are substantively affected by the ruling, not just the failure-to-file penalty as some early coverage suggested.

Worked Example: 2021 Late-File Penalty

Take a hypothetical filer who owed $10,000 on their 2020 return (originally due April 15, 2021) and filed six months late on October 15, 2021. Both dates fall inside the COVID disaster window. Assume the IRS assessed a failure-to-file penalty at 5% × 6 months = 30%, capped at 25% = $2,500. It also assessed underpayment interest for the six months at roughly 4% annual, compounding daily — call it $200 for the period.

Under Kwong, the April 15, 2021 original deadline was mandatorily postponed into the disaster period. The penalty should not have attached at all. The hypothetical refund would be the full $2,500 penalty plus the $200 in interest, minus any legitimate post-disaster amounts. That is a $2,700 refund claim on a single year's penalties.

If this same filer also had a 2019 return (due July 15, 2020, per the IRS's COVID filing relief) or a 2021 return with a disaster-period extension, each year requires a separate Form 843. The IRS Form 843 instructions are explicit: one form per tax year, one penalty type per claim.

Common Estimation Mistakes

Using the notice balance instead of the penalty line. CP14 and CP501 notices combine tax owed, penalties, and interest in one total. The refundable amount is only the penalty and interest rows — never the underlying tax, which was always owed regardless of the disaster window. Pull the line-item breakdown from IRS transcripts, not just the notice total.

Ignoring partial-year exposure. Some taxpayers assume that if their return was even one day inside the disaster window, the entire penalty is refundable. But if your return was due January 15, 2024 — after the July 10, 2023 disaster close — no postponement applies. The disaster window cutoff is strict.

Forgetting estimated-tax penalties (IRC §6654 / §6655). Quarterly estimated-tax underpayment penalties also apply if the payment due dates fell inside the disaster window. Many taxpayers and preparers miss this because quarterly penalties are smaller per payment, but they add up across 2020–2022 quarters.

EisnerAmper's analysis of post-Kwong refund opportunities notes that multi-year filers often discover the estimated-tax penalty recovery is larger than expected once all four quarters per year are reviewed.

Not pulling IRS transcripts. Estimating from memory or from old copies of notices is unreliable. Order IRS Account Transcripts (available via IRS Online Account or Form 4506-T) for each year in question. The transcript shows the exact penalty amounts assessed and any prior abatements.

What to Do Next

The statute of limitations to file Form 843 is three years from the date the tax was paid — which puts the practical deadline at July 10, 2026 for most COVID-period penalties. After that date, the IRS can legally refuse to process the claim even if Kwong survives its pending appeal.

Filing early matters because paper-only submissions require certified mail, and IRS processing times for Form 843 currently run four to six months. Waiting until late June leaves almost no margin for a mailing error.

Our Kwong protective refund claim service starts with a free 10-minute eligibility screen based on your IRS notices, then a CPA prepares each Form 843 with the required protective language and files by certified mail with tracking. For a deeper look at the overall case, see our Kwong overview guide.

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