The Opportunity

Two recent federal tax decisions, Kwong v. United States, 179 Fed. Cl. 382 (2025) and Abdo v. Commissioner, 162 T.C. 148 (2024), may create a refund opportunity for an impacted business or individual taxpayer to seek a refund or abatement of penalties and interest that were assessed by the Internal Revenue Services (the “IRS”) during the COVID‑19 federally-declared disaster period of January 20, 2020, through May 11, 2023. In both decisions, the courts concluded that Internal Revenue Code (“IRC”) § 7508A(d), which was in effect during the relevant period, automatically postponed federal tax filing and payment deadlines for the entire federally declared disaster period (i.e., January 20, 2020, through May 11, 2023), plus 60 days (“the COVID-19 Disaster Period”).

Accordingly, filing and payment deadlines were suspended from January 20, 2020, through July 10, 2023. As a result, if these holdings are upheld, a taxpayer that paid certain penalties and interest for taxes due during that time may be entitled to a refund of any amount paid or abatement of any amount assessed but not yet paid. Nevertheless, the deadline to protect a taxpayer’s rights to any refunds will run before the issue is resolved. In most cases, a taxpayer seeking a refund of penalties and interest related to the COVID-19 Disaster Period must file a protective refund claim on or before July 10, 2026, for the claim to be considered timely filed.

Legal Background

IRC § 7508A(d), as effective for the relevant periods, provided an automatic suspension of certain tax deadlines during a federally declared disaster, plus an additional 60 days. Under IRC § 7508A(a)(2) the suspension applies to “the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date.” Despite the language in the statute, the IRS routinely issued penalty and interest assessments related to tax obligations arising during the disaster period.

In Abdo, in which the IRS challenged the timeliness of the filing of a petition in the Tax Court, the court held that the statute entitles taxpayers to a mandatory suspension period and requires no IRS discretionary action for the postponement to take effect. 162 T.C. 148, 156 (2024). The Abdo court concluded that Congress was clear when it provided that, for federally declared disasters, specified deadlines are postponed as a matter of law. The decision rejected the idea that taxpayers must wait for the IRS to identify each covered deadline or each covered act through ad hoc notices. In Kwong, the Court of Federal Claims also confirmed the dates of the COVID-19 Disaster Period. 179 Fed. Cl. 382 (2025). The Kwong decision specifically applies the postponement window to tax refund suits.

Who Is Eligible

Any taxpayer with tax obligations that were due between January 20, 2020, and July 10, 2023, and that were assessed penalties or interest related to those obligations is potentially eligible for relief. In addition, a taxpayer with a tax obligation due before January 20, 2020, may be entitled to relief for the portion of interest or penalties that accrued within the COVID-19 Disaster Period.

Penalties for which relief may be obtained include failure-to-file penalties, failure-to-pay penalties, underpayment interest, estimated tax penalties, as assessed against taxpayers who are qualified as the result of having a home or business in the federally declared disaster area. Failure‑to‑file and failure‑to‑pay additions to tax under IRC § 6651(a) are obvious candidates because they begin to accrue only after the applicable last date to file or pay has passed. If the last date was postponed by IRC § 7508A(d), the foundational trigger for those penalties did not occur until the end of the postponement period, which the Kwong court held to be July 10, 2023.

Critical Deadlines

Refund claims are governed by strict statutes of limitation, principally IRC § 6511. The deadline to claim a refund or credit under IRC § 6511 is typically the later of three years from the filing deadline or two years from date tax was paid. Because Kwong treats the COVID-19 disaster as extending certain deadlines through July 10, 2023, the deadline to file refund claims in most cases is July 10, 2026.

Final Outcome Still Undecided

Because the government has filed an appeal, the Kwong decision is not yet final. As such, a taxpayer should not expect that the IRS will allow refund claims or requests for abatement until the appeal is decided. The IRS issued Action on Decision AOD 2026-01 announcing a limited acquiescence to Abdo. Filing a claim is essential to preserving the right to obtain relief should the higher courts deny the government’s appeal or should the government challenge different facts than were present in Abdo.

Conclusion

An affected taxpayer should act quickly to preserve their right to obtain relief. While the ultimate outcome of the Kwong decision remains uncertain, taking the appropriate action now could result in substantial relief later.

Please contact the Kean Miller Tax Group if you would like assistance reviewing IRS account transcripts, computing potential refund amounts, or preparing abatement requests.

Jaye Calhoun, Willie Kolarik, Derek Brondum, and Kevin Baker, are members of Kean Miller’s Tax Group, advising businesses and individuals on complex federal, state and local tax (SALT), and estate planning matters. The team regularly counsels clients on federal tax compliance, planning, audits, and controversies, including IRS examinations, appeals, refund claims, and litigation involving complex tax disputes. Drawing on deep knowledge of the Internal Revenue Code and Treasury regulations, they help clients proactively identify opportunities, minimize risk, and navigate evolving tax developments, including issues involving penalty and interest assessments such as those discussed in this article.