Is the IRS Holding Your Money? How the Kwong Ruling Impacts Pandemic-Era Tax Refunds for Individuals, Companies, and Non-Profit Organizations

The U.S. Court of Federal Claims decision in Kwong v. United States, 179 Fed. Cl. 382 (2025) has fundamentally altered the landscape for pandemic-era tax liabilities. The court ruled that under federal law, tax deadlines were automatically extended for the entire duration of the COVID-19 disaster period, plus 60 days (i.e., from January 20, 2020, to July 10, 2023). 

This contradicts the IRS’s previous restrictive relief, potentially rendering millions of dollars in previously paid penalties and interest by taxpayers (e.g., individuals, companies, nonprofit organizations) that accrued between 2020 and 2023 eligible for a full refund. 

Identifying Your Eligibility for a Refund or Abatement

In general, a taxpayer has the later of three years from the original due date of the return or two years from the time the tax was paid to file a claim for credit or refund. Because the Kwong court recognized that certain federal tax obligations were postponed to July 10, 2023, many tax liabilities, including “failure-to-file” and “failure-to-pay” penalties, assessed during the three-year pandemic window may have been legally invalid. 

• If you paid these penalties or underpayment interest, or if the IRS withheld interest on a “late” refund during this period, you may be entitled to recover those funds.
• If you did not pay these penalties or underpayment interest, you may be entitled to abatement.

This applies even if you previously believed your filing was late; under Kwong, those same returns may now be classified as timely.

The Role of a Protective Refund Claim

As the federal government is expected to appeal this decision, tax professionals recommend filing a “protective claim” immediately. This procedural action “freezes” the statute of limitations for your specific account. By filing now, you ensure that if the Kwong ruling is upheld by higher courts, you will remain eligible for your refund even if the standard processing window expires while the appeal is pending. 

Navigating Complex Refund Litigation Procedures

Unlike an abatement request, securing a refund under the Kwong theory necessitates an immediate and precise integration of statutory interpretation and administrative law to navigate its technical complexities. Because the IRS is likely to mount rigorous procedural defenses, it is prudent to consult a tax professional well-versed in tax controversy and procedural matters to structure your claim. Professional legal oversight ensures your filing is technically sound, properly preserving every legal argument necessary to withstand IRS challenges during the claim process and, if necessary, in litigation. 

Take Action: Secure Your Potential Refund

The window to act may close as soon as July 10, 2026, exactly three years after the postponed deadline established by the court. Don’t let the statute of limitations expire on money that may rightfully be yours.

If you have any questions, please contact a member of our Tax Controversy team to review your tax refund eligibility and ensure your claim is preserved before the July deadline.

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