A recent decision from the U.S. Court of Federal Claims could materially change how federal tax deadlines for the COVID‑19 emergency period are interpreted and whether certain penalties and interest were properly imposed.
In Kwong v. United States, 179 Fed. Cl. 382 (Nov. 25, 2025) (PDF - 222.38KB), the court interpreted the mandatory disaster-relief postponement provision in Section 7508A to apply from Jan. 20, 2020, through July 10, 2023. This postponement period is far broader than the discrete, notice-based relief the IRS argued was offered — most notably the deferral of April 15, 2020, filing and payment deadlines to July 15, 2020.
Although Kwong arose in the context of refund-suit timeliness as defined in Section 6532(a), the court’s statutory interpretation is being cited as a potential basis for refund or abatement claims with respect to penalties and interest computed by reference to due dates falling within that window.
Section 7508A allows certain filing deadlines to be postponed during federally declared disasters. Congress amended the provision in 2019 to clarify that the postponement applies for the full length of the disaster period, plus an additional 60 days. After the COVID-19 global pandemic began, President Donald Trump declared a nationwide emergency beginning Jan. 20, 2020, which remained in effect until May 11, 2023. Applying the additional 60 days, the court concluded that the postponement period extended through July 10, 2023.
The court rejected the IRS’s position that relief should be limited to the shorter filing deadline extensions announced during the pandemic, emphasizing that the scope of relief is governed by congressional statute rather than IRS administrative guidance. As a result, penalties and interest imposed during that time might not have been justified.
Grant Thornton insight:
Impacted taxpayers include individuals and businesses assessed late-filing or late-payment penalties during the Jan. 20, 2020, to July 10, 2023, period. The most common exposure arises in connection with failure-to-file and failure-to-pay penalties, estimated tax penalties under Sections 6654 and 6655, and information return penalties, including those related to Forms 5471 and 5472.
While some taxpayers are currently contesting their penalties — and therefore already aware of this issue — others likely paid the penalty without raising a Kwong-based argument.
Under Kwong, there is a strong argument that if the underlying due date fell between Jan. 20, 2020, and July 10, 2023, that deadline was automatically postponed under Section 7508A. If so, the IRS may have calculated penalties using an incorrect due date, meaning they were not properly imposed. As a result, taxpayers may have strong grounds to seek abatement or refunds.
Beyond those who were assessed penalties, two additional groups of taxpayers may be impacted. The first is those who paid interest on liabilities tied to COVID-period deadlines. These taxpayers paid interest on tax liabilities where the original due date fell between Jan. 20, 2020, and July 10, 2023. Under Kwong, if those due dates should have been postponed under Section 7508A, interest may have begun accruing too early. As a result, the IRS may have overstated interest, creating a potential refund or abatement opportunity.
This most often applies to taxpayers that:
- Paid 2019–2021 balances
- Carried liabilities over time
- Entered installment agreements with significant interest
Because interest depends on the due date, any change to the due date under Kwong may require the interest calculation to be recomputed.
The final group of potentially impacted taxpayers is those with denied or time-barred refund claims, which rely on strict timing rules. Refund claims and refund suits (under Sections 6511 and 6532) are subject to deadlines tied to events such as payment or IRS disallowance. If those deadlines fell within the COVID period, Kwong supports the position that the deadlines were extended under Section 7508A.
As a result:
- Claims treated as late may actually be timely
- Dismissed refund suits may still be viable
- Taxpayers that did not file because they believed time had expired may now have an opportunity
Overall, Kwong may extend the statute of limitations, potentially reopening claims that were previously closed.
The decision in Kwong is not the final word. Further litigation is expected, and the IRS is likely to resist broad application. That said, the decision is grounded in statutory text enacted by Congress, and several taxpayers have already begun pursuing claims.
Next steps
Taxpayers should promptly evaluate whether they are impacted by Kwong, particularly where significant penalties or interest were paid in connection with deadlines during the COVID-19 period. If exposure exists, the ability to recover those amounts will depend on the applicable statute of limitations under Section 6511, which is highly fact-specific and generally requires claims to be filed within two years from the date of payment or three years from the filing of the return, whichever is later.
Taxpayers should consider filing a protective claim to keep the refund statute of limitations open, while court cases interpreting Section 7508A are pending. Because these deadlines are already expiring for many taxpayers, timely action is critical.
Given the complexity and the need for a tailored, fact-driven analysis, taxpayers should engage early to allow themselves sufficient time to identify impacted payments, evaluate technical positions, and prepare and file protective claims where appropriate. Early coordination will be important to ensure claims are properly developed and filed within the applicable statutory windows.
Contact:
Managing Director, Washington National Tax Office, Grant Thornton Advisors LLC
William E. “Buck” Buchanan is the lead IRS Practice and Procedure subject matter expert in the Washington National Tax Office (WNTO).
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