Late last year a federal court ruling opened a refund window that tax pros say is one of the biggest in decades. Most affected taxpayers don’t know it exists. The case is Kwong v. United States, decided November 2025 by the U.S. Court of Federal Claims.
The court ruled that the COVID federal disaster declaration automatically suspended tax filing and payment deadlines for the entire emergency period—not just the shorter extensions the Internal Revenue Service (IRS) gave back then.
The Tax Refund Window Most Don’t Know Exists
The disaster declaration ran from January 20, 2020 to May 11, 2023. Under IRC § 7508A(d), the postponement lasts through the disaster plus 60 days, so until July 10, 2023. The court’s opinion was blunt: the plain meaning of the statute gives an automatic extension from the start of the disaster through the end plus 60 days.
If that holds on appeal, penalties and interest charged for any returns or payments made within that window were improper.
- Who’s affected?
- Individuals, small businesses, corporations, estates, trusts, and entities with income, employment, estate, gift, or excise tax obligations. Also international information returns, which carry steep penalties even when no tax is due.
- What charges could be reversed?
- Failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, and interest that started accruing earlier than the court’s interpretation allows. Also possible overpayment interest for 2020-2023 under the same logic.
Who Gets Left Behind – and What the IRS Could Do
A trickier issue: taxpayers already delinquent before January 20, 2020. Treasury Reg. § 301.7508A-1(f) gives an example that pre-disaster delinquents don’t get a blanket wipe of prior penalties and interest. The IRS sticks to that. But some tax lawyers argue that a court finding of statutory suspension would override the regulation. Kwong didn’t settle that.
The DOJ is expected to appeal. A final court ruling could take years. That’s why July 10, 2026 matters. Standard refund claim deadlines: three years from filing or two years from paying. For most people, both hit July 10, 2026.
Protective claims
Because the law is unsettled, professionals are pointing to protective refund claims. You don’t need a precise dollar amount when filing. The IRS manual says a valid protective claim has to identify the contingencies, alert the IRS to the nature of the claim, and specify the tax years.
That’s it. In practice, file Form 843 with “Protective Refund Claim Pursuant to Kwong Case” written on top, plus as much detail as you have. The IRS will hold it until the legal question is resolved. The claim stops the statute of limitations from running. One hitch: Form 843 can’t be filed electronically. Paper only. Use certified mail to prove timely filing. If millions of claims come in at once, expect backlogs and administrative mess.
Kwong Refunds Favor the Advised
The National Taxpayer Advocate posted on April 30, 2026 that access disparity is the real policy problem. Without IRS or congressional action, the outcome will split along who has a tax advisor. People with advisors will learn about Kwong, file on time, and get refunds if the ruling stands.
People without advisors—especially low and moderate income—will likely miss the deadline without ever knowing. The Advocate recommended the IRS do four things: publicize the issue widely, grant a six-month deadline extension, explore systemic relief without requiring individual filings, and build an electronic submission portal. As of publication, none of those steps had been announced.
If you’re in an audit, Appeals, or active litigation, different rules apply. Open examination statutes may give more time beyond July 10, and Kwong could affect settlements or strategy. Those cases need individual review.
