The COVID-19 pandemic disrupted nearly every aspect of daily life, including the administration and enforcement of federal tax laws. Now, a recent decision from the U.S. Court of Federal Claims may create a significant opportunity for taxpayers who believed they had missed important IRS deadlines during that period.
In Kwong v. United States, a federal court ruled that certain tax deadlines were automatically suspended for the entire duration of the federally declared COVID-19 disaster period. According to the court, the suspension began on January 20, 2020—the start of the national emergency—and continued through July 10, 2023, after accounting for the mandatory 60-day extension required under Internal Revenue Code §7508A(d) – https://www.law.cornell.edu/uscode/text/26/7508A.
The case involved taxpayer Terry Kwong, who sought refunds of penalties assessed by the IRS for prior tax years. Generally, taxpayers have two years after the IRS denies a refund claim to file suit in federal court. The IRS argued that Mr. Kwong filed too late and asked the court to dismiss the case. The court disagreed, holding that the statute automatically paused applicable tax deadlines during the COVID disaster period, regardless of the shorter relief windows the IRS announced in various pandemic-related notices.
The ruling is potentially significant because it could affect millions of taxpayers whose claims, refund requests, or penalty challenges were previously considered untimely. If the court’s interpretation ultimately stands, many deadlines that would have otherwise expired during the pandemic years may still remain open today.
This could include taxpayers who paid failure-to-file or failure-to-pay penalties during the COVID period, taxpayers who were denied refunds because claims were filed late, or taxpayers who may have been entitled to additional interest on delayed refunds. In many cases, the IRS processed these matters under normal statute-of-limitations rules without considering the broader tolling effect recognized by the court in Kwong.
Perhaps the most important takeaway is the potential deadline created by the decision. Under the court’s analysis, many affected statutes of limitation may now expire on July 10, 2026. That date has become increasingly important among tax professionals, many of whom are advising taxpayers to submit protective refund claims before then in order to preserve their rights while the legal issues continue to develop.
It is important to understand that the Kwong decision is highly technical and may ultimately face additional challenges or appellate review. The IRS has not broadly adopted the court’s interpretation at this time, and taxpayers should not assume relief will be automatically granted. However, protective claims are often used in situations like this specifically to preserve a taxpayer’s position while legal uncertainty is resolved.
For taxpayers who paid significant penalties during the pandemic years, had refund claims denied as untimely, or experienced lengthy refund delays, the decision may warrant a careful review of their IRS account transcripts and prior filings. Even if the ultimate outcome remains uncertain, failing to act before the potential July 10, 2026 deadline could permanently close the door on possible relief.
Tyler Reeves, EA
(303) 353-1261
Timberline Tax Group, LLC