A November 2024 ruling by Judge Molly Silfen of the U.S. Court of Federal Claims in Kwong v. United States has created a limited opportunity for taxpayers to recover penalties and interest the IRS levied during the Covid-19 pandemic. The decision interprets the tax code's automatic deadline postponement provisions—typically reserved for natural disasters—as applying to the entire federal disaster period declared by President Trump, which ran from January 20, 2020, through May 11, 2023, plus an additional 60 days.
Under this interpretation, tax filing and payment deadlines were effectively paused for over three years. Returns and payments made during that window were never technically late, meaning the IRS should not have assessed penalties or interest. The agency had argued that the statute required a defined end date to trigger the automatic extension, a position now being contested in court. The Justice Department is expected to appeal the Kwong decision.
National Taxpayer Advocate Erin Collins flagged the issue in a blog post on Thursday, urging tax professionals and their clients to act before the opportunity closes. “This issue is widespread and not limited to a small or specialized group of taxpayers,” Collins wrote. “Impacted taxpayers represent a broad cross-section of the public, including individuals, small businesses, large corporations, estates, and trusts.”
The scale of potential exposure is significant. In fiscal year 2022 alone, the IRS levied more than 12 million estimated-tax penalties and upward of 16 million failure-to-pay penalties, totaling more than $12 billion—though some were later reduced or removed. Washington tax lawyer Steve Rosenthal told the Wall Street Journal in February, “I think it’s quite unusual and I think it’s potentially a large deal. The IRS is really on its hind heels here.”
Major corporations have already moved on the ruling. Western Digital and Meta Platforms are among the companies that have cited the decision in their own ongoing disputes with the IRS. Tax attorneys have been filing claims for individual and business clients at a brisk pace. Alyssa Whatley, a South Carolina-based attorney at Frost Law, said she is handling claims ranging from $600,000 for an individual to $2 million for a business, while also using a technology platform to assist smaller-dollar taxpayers. “It kind of is a mad dash,” she told the Journal. “We don’t want to miss this deadline for our taxpayers that have significant savings.”
For most taxpayers, the deadline to file a refund or abatement claim is July 10, 2025—three years from the extended deadline of July 10, 2023, which is itself the endpoint of the disaster period plus the 60-day extension. That cutoff covers claims related to tax years 2019 through 2022. Filing requires submitting Form 843, Claim for Refund and Request for Abatement, by mail—there is currently no electronic filing option. Collins recommends taxpayers send claims via certified mail to establish a paper trail.
Because the legal outcome remains uncertain, Collins also encouraged taxpayers to file what are known as protective claims, which preserve the right to a refund without requiring a precise dollar amount. A protective claim needs to identify the relevant tax years and describe the contingency—in this case, the pending resolution of the Kwong litigation. Advisors should note that this issue may also intersect with broader retirement planning concerns, as penalties can erode savings. For context, a recent Edward Jones-Gallup study found that only 16% of Americans achieve financial fulfillment, highlighting the importance of advisors in navigating such complexities.
Under the Kwong ruling, taxpayers may be entitled to refunds or abatements on three categories of charges: penalties for failing to file on time, interest that began accruing earlier than it should have, and penalties for failing to make estimated tax payments during the disaster period. According to Collins, some practitioners believe the relief could extend even to pre-pandemic delinquencies, though that interpretation remains contested and was not addressed directly by the court. Advisors should also be aware of other financial challenges clients face, such as student loan debt posing a growing threat to retirement security, which may compound the need for timely tax relief.
