If you were charged penalty and interest for taxes at any point between January 2020 and July 2023, there is a chance the IRS over-assessed and owes you money back, at least for now. 👀

A late-2025 federal court ruling held that the COVID-19 disaster declaration automatically postponed federal tax deadlines for that entire 42-month stretch, and any late-filing penalty, late-payment penalty, or underpayment interest the IRS computed using a "due date" inside that window is potentially refundable. 🤞 The Taxpayer Advocate Service (TAS) issued an analysis on April 30 estimating tens of millions of taxpayers are eligible, and is explicitly recommending taxpayers file protective claims to preserve their rights.

I.e. - the refund isn't automatic, unsurprisingly. The deadline to file a protective claim is July 10, 2026. Once that window closes, the statute of limitations runs and the money stays with the government.

What the Court Actually Held

The case is Kwong v. United States. The judge ruled that the statute that postpones tax deadlines after a federally declared disaster (a la COVID), is self-executing and mandatory. The President declared the COVID-19 disaster on March 13, 2020, retroactive to January 20, 2020. The declaration ran through May 11, 2023. Add the 60-day tail required by the statute and the disregarded period runs from January 20, 2020 through July 10, 2023.

Under this ruling, penalties and interest the IRS computed using "due dates" inside that period are over-assessed. 🫨 Note that the IRS has not acquiesced and is expected to appeal to the Federal Circuit, which is why claims are filed protectively. The protective filing preserves your position while the appellate process runs its course.

Who Should Look at This

If you owed tax on your 2019, 2020, 2021, or 2022 return and you either paid late, filed late, or carried a balance into an installment agreement at any point during 2020 through 2023, you are likely a candidate. High fluctuating income taxpayers, business owners on quarterly estimates, anyone who extended a return and underpaid. The bigger the balance you carried, the bigger the refund opportunity.

How to File on Your Own

If you want to take a run at it on your own (or for your clients), the protective claim process runs a few steps. 👇

Step one is pulling your IRS Account Transcript for each tax year in question (2019, 2020, 2021, 2022). Request it through your IRS Online Account or call them directly. The Account Transcript is the document with all the three-digit transaction codes on it. Look for TC 166 (late filing penalty), TC 276 (late payment penalty), TC 196 (interest assessed), and TC 176 (underpayment penalty).

Step two is identifying the "due date used" by the IRS for each assessment. If the original due date or the extended due date for the return falls between January 20, 2020 and July 10, 2023, you have at least a partial claim. Add up the penalty and interest dollars attributable to those years. The Account Transcript shows the full penalty but for 2019 and 2023 you'll need to run the math to get the actual refundable amount.

Step three is filling out Form 843, Claim for Refund and Request for Abatement. One form per tax year. Write "Protective Refund Claim Pursuant to Kwong Case" across the top of page one (the caption TAS specifically recommends in its guidance). Under "reason", most practitioners are advising selecting "Penalty > Abatement of refund... due to reasonable cause..." and then including a blurb in the "Other text space only" about Kwong Protective Filing. Line 4 is a refund of tax on "Income" and check the correct return type on Line 5. On Line 6, you'll need to list the relevant IRC sections. See below table for a quick reference:

Last step is signing and mailing the package, 📫 (meaning it's not e-filed) USPS Certified Mail with Return Receipt, to the IRS Service Center listed on your most recent notice. If you have no notice, mail it to the service center where your 1040 was filed. Keep the green card and the certified-mail receipt. That is your proof of timely filing under §7502.

A Few Things to Know

The IRS is likely to deny these claims on the first pass. That is expected, and it is why we file them protectively.

This is a high profile case and likely to get drug out in the courts for a while. It's definitely not a slam dunk, but it's also critical to get these filings done right, or risks losing all rights to these overpayments of penalty and interest.

We're handling limited cases of these, but if you have a significant claim and want a pro to review or handle it, reply directly to this email.

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