QUESTIONS ADDRESSED IN THIS VIDEO
What is the Kwong case and why is it getting attention?
The court interpreted a provision of the Internal Revenue Code to provide a mandatory postponement period during the COVID-19 federal disaster, which ran from January 20, 2020 through July 10, 2023. That interpretation can extend the time for certain refund claims, penalty abatements, and related interest claims — creating meaningful opportunities for affected taxpayers.
What does this mean in practical terms for taxpayers and practitioners?
Some taxpayers may still be able to recover penalties and interest that were assessed during the COVID period, if those amounts should have been suspended under disaster relief rules. Relief is not automatic — taxpayers generally need to affirmatively file a claim or protective claim to pursue it.
What is a protective claim and when does it make sense?
A protective claim preserves a taxpayer’s right to a refund when there is legal uncertainty. It keeps the statute of limitations open and is appropriate when relief depends on a contingency — such as a future court decision or upcoming IRS guidance. It is typically just the first step; additional action, such as amending a return, is usually required to perfect the claim.
What is the key deadline?
For many, if not all, affected taxpayers, the critical deadline is July 10, 2026.
Who should be looking at this?
Everyone should at least consider it. Potentially affected taxpayers include individuals, businesses, and trusts that filed returns late or made payments late during the COVID period and incurred failure-to-file penalties, failure-to-pay penalties, or related interest. Taxpayers who had audits or notices where interest was accruing during that period should also explore whether recovery is possible.
What is a practical first step for identifying opportunities?
Review your tax documents or request an IRS transcript through the IRS online system. Look for returns where penalties and interest were assessed between January 20, 2020 and July 10, 2023. Also note any prior penalty or interest abatement requests tied to that period.
What should practitioners keep in mind when preparing the filing?
Be specific — you do not want to leave the statute of limitations open for the entire return. Reference the Kwong case by name, cover all potential penalties and interest during the relevant period, and explain why the claim is being filed. File Form 843 with an accompanying statement clearly indicating it is a protective claim. File by certified mail to establish proof of timely submission.
Is this a settled issue?
No. The government has appealed the Kwong decision and the IRS has signaled disagreement with the court’s position. That is precisely why protective claims — rather than standard refund claims — are the recommended approach. The key takeaway: preserve your rights now before the July 10, 2026 deadline.
