Filing your protective claim – Kwong decision

The Kwong v. United States court decision suggests that the IRS may have charged some taxpayers penalties and interest that were not legally owed during the COVID-19 disaster period. The court held that a section of the tax law automatically postponed certain federal tax deadlines from 20 January 2020, through 10 July 2023, because of the federally declared COVID disaster. If those deadlines were postponed, then penalties and interest that depended on those deadlines may have been assessed incorrectly.

In practical terms, if you paid failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, or related interest on taxes that were due during that period, you may have a basis to request a refund or abatement. Many practitioners are filing protective refund claims to preserve taxpayers’ rights while the issue is being resolved.

However, taxpayers should be aware that the case is not yet final. The IRS has appealed the decision and does not currently agree with the court’s interpretation. As a result, filing a claim does not guarantee a refund, but it may preserve the ability to benefit if the courts ultimately uphold the decision.