Kwong v. United States: Current Status of COVID 19 Tax Refund Claims
The federal court decision in Kwong v. United States continues to create potentially important refund issues for taxpayers whose filing, payment, refund claim, or refund litigation deadlines were affected by the COVID 19 federal disaster period.
However, the situation has changed substantially since the case was first decided.
The United States has appealed the decision to the United States Court of Appeals for the Federal Circuit. The July 10, 2026 protective claim date identified by the National Taxpayer Advocate has passed for many taxpayers. At the same time, some taxpayers may still have open refund periods because Internal Revenue Code Section 6511 generally uses the later of a three year return based period or a two year period measured from payment.
What Did the Kwong Court Actually Decide?
Kwong v. United States, 179 Fed. Cl. 382 (2025), involved penalties relating to tax years 2007, 2010, 2011, 2015, and 2016.
The taxpayer filed requests for abatement in 2020. The IRS issued notices disallowing several of those claims in September and October 2020. Kwong filed suit in the Court of Federal Claims in February 2023.
Ordinarily, IRC Section 6532(a) generally provides a two year period after the IRS mails a notice of disallowance for bringing a refund suit.
Kwong argued that the former version of IRC Section 7508A(d), enacted in 2019, postponed the relevant deadline because of the COVID 19 federal disaster.
The Court of Federal Claims agreed that the applicable mandatory disaster period began January 20, 2020 and continued until July 10, 2023, which was 60 days after the May 11, 2023 end of the federal COVID disaster declaration.
Because Kwong filed his lawsuit before July 10, 2023, the court held that his challenges relating to the 2007, 2010, and 2011 years were timely.
The court did not hold that every IRS penalty assessed during the pandemic must be refunded. It also did not hold that every taxpayer automatically received a refund claim deadline of July 10, 2026.
Why the Distinction Between Sections 6532 and 6511 Matters
Two different limitation statutes frequently arise in federal tax refund cases.
IRC Section 6511 generally determines when a taxpayer must file an administrative claim for credit or refund with the IRS.
IRC Section 6532 generally determines how long a taxpayer has to file a refund lawsuit after the IRS disallows the administrative claim.
The central timeliness issue actually decided in Kwong involved Section 6532.
The broader discussion about taxpayers filing refund claims by July 10, 2026 involves applying the reasoning of Kwong to Section 6511. That broader application remains unsettled.
The July 10, 2026 Date Has Passed
The National Taxpayer Advocate advised potentially affected taxpayers that July 10, 2026 was a critical date for many refund and protective claims.
The reasoning was that if the former Section 7508A mandatory disaster period extended relevant deadlines through July 10, 2023, a three year refund claim period could potentially remain open through July 10, 2026.
That date has now passed.
For taxpayers whose only potentially available filing period expired on July 10, 2026, filing a new claim after that date presents a significant limitations problem.
However, July 10, 2026 was not necessarily the deadline for every taxpayer.
A Later Payment Can Produce a Later Refund Claim Deadline
IRC Section 6511(a) generally requires a refund claim to be filed within the later of:
- Three years from the time the return was filed
- Two years from the time the tax was paid
The separate two year period can be important for taxpayers who paid penalties or interest relatively recently.
For example, the National Taxpayer Advocate illustrated a situation in which a taxpayer paid potentially affected penalties and interest on July 1, 2025. The two year period measured from that payment would extend to July 1, 2027, which is later than July 10, 2026.
Accordingly, a taxpayer should not assume that every potential Kwong claim became untimely on July 10, 2026.
A Timely Claim Does Not Automatically Mean the Entire Amount Is Refundable
Section 6511 contains another limitation that is sometimes overlooked.
In addition to the deadline for filing a claim, IRC Section 6511(b)(2) contains lookback rules that can limit the amount that may actually be refunded based on when the underlying payment was made.
The Supreme Court has treated the filing deadline and the lookback limitation as separate requirements.
Therefore, determining that a claim was filed on time does not by itself establish the amount that can be recovered.
The IRS Continues to Disagree With the Broad Reading of Kwong
The IRS has publicly rejected the broader interpretation of the former Section 7508A rules.
In Action on Decision 2026 01, addressing Abdo v. Commissioner, the IRS acquiesced only in the result that the COVID 19 disaster declarations created a mandatory 60 day period from January 20, 2020 through March 20, 2020.
The IRS expressly declined to acquiesce in the Tax Court's broader reasoning and stated that it does not agree with an interpretation that would produce a mandatory postponement extending beyond those 60 days.
Kwong Is Now Pending in the Federal Circuit
The United States appealed Kwong.
The appeal is pending in the United States Court of Appeals for the Federal Circuit as Case No. 2026 1843.
As of August 2026, there has been no Federal Circuit decision resolving the dispute.
Taxpayers therefore should not treat the Kwong interpretation as finally settled federal tax law.
A New Case Shows Why the Appeal Matters
On August 5, 2026, the Court of Federal Claims issued a reported opinion in BMW (US) Holding Corporation and Subsidiaries v. United States.
BMW sought a refund of more than $38 million relating to its 2019 corporate income tax return. The IRS argued that the refund claim was filed outside the normal three year limitation period under IRC Section 6511.
BMW argued, among other things, that Section 7508A affected the running of the refund claim period during the COVID 19 disaster.
The court concluded that the issue could depend on whether Kwong is upheld by the Federal Circuit and held that portion of the dispute in abeyance.
BMW demonstrates that the implications of Kwong may extend beyond penalty refund cases and may affect the application of Section 6511 itself. It also demonstrates that the law remains unresolved.
Congress Has Since Changed Section 7508A
Another important limitation on the significance of Kwong is that the case interprets an older version of the statute.
Congress added the disputed mandatory disaster provision in 2019.
Congress then amended Section 7508A in November 2021. That amendment applies to federally declared disasters declared after November 15, 2021 and changed the manner in which the mandatory period is calculated.
Congress changed the statute again through the Filing Relief for Natural Disasters Act, enacted July 24, 2025.
Among other changes, the 2025 law increased the mandatory disaster period from 60 days to 120 days for declarations made after enactment.
Those later amendments do not determine how the former version of Section 7508A applies to the COVID 19 declarations at issue in Kwong.
Can a Kwong Claim Still Be Filed?
Possibly, depending on the taxpayer's specific dates.
For many taxpayers relying solely on the potential July 10, 2026 three year period, that date has passed.
But taxpayers who made later payments may have a later deadline under the two year from payment rule of Section 6511.
Other situations may involve different limitation periods, previously filed protective claims, unpaid penalties, refund claim disallowances, or pending litigation.
Important dates can include:
- The original return filing date
- Any extended filing date
- The date each penalty or interest amount was assessed
- The date each amount was paid
- Dates on which overpayments or credits were applied
- The date a Form 843 or other refund claim was filed
- The date the IRS mailed a notice of claim disallowance
- Whether a protective claim was filed before an applicable limitation period expired
An IRS tax account transcript can be particularly useful for reconstructing this history.
Current Form 843 Procedures for Kwong Claims
The IRS has created specific processing procedures for certain Form 843 claims citing Kwong.
Certain individual taxpayers with an IRS Online Account may currently submit Form 843 electronically when the claim involves fully paid penalties or interest and specifically cites Kwong.
The IRS has also published special paper filing instructions for individuals and businesses submitting those claims.
These procedures do not extend an otherwise expired statute of limitations. They provide a method for submitting a claim when the taxpayer still has a timely basis for filing one.
Other Penalty Relief Should Be Considered Separately
Kwong should not replace analysis of other penalty relief provisions.
For older tax periods, First Time Abate may remain available for certain qualifying penalties. Reasonable cause may also apply when the taxpayer can establish the applicable legal standard based on the facts and circumstances.
The new Automatic Exemption from Penalty program generally begins with eligible 2025 tax year returns and 2026 quarterly returns, so it ordinarily is not the administrative relief mechanism for older COVID period liabilities.
For more information about those alternatives, see IRS penalty abatement, reasonable cause, and administrative penalty relief.
For broader assistance evaluating IRS correspondence, deadlines, account history, and response options, see my IRS notice review and response services.
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