Kwong v. United States: A Pandemic Tax Plot Twist (and Why You Should Care Now)

A November 2025 court decision just dropped a potential refund bombshell—and if you haven’t looked at your tax files lately, now’s the time. In Kwong v. United States, a federal court said the IRS tax deadlines weren’t just “paused a bit”—they were automatically suspended for over three years (January 20, 2020–July 10, 2023).

Translation

Penalties and interest charged by the IRS during that window might not stick. In short, the IRS may owe you money. This matters because, if the court is right, a lot of “late” filings and payments weren’t late at all. That means:

• Failure-to-file penalties? May be refundable.
• Failure-to-pay penalties? Possibly gone.
• Interest charges? Potentially back in your pocket.

The catch (and there’s always a catch)

This isn’t settled law yet, as the case remains pending. The IRS appealed to the Federal Court of Appeals on May 15, 2026. But the statute of limitations to file a refund claim doesn’t care about pending issues.

As a result, most refund claims need to be filed by July 10, 2026 (or sooner, depending on the facts). Miss that deadline, and the refund opportunity disappears—poof.

What has changed? There are two main reasons why this case exists:

1. The court read the statute literally and said, “No one-year cap here”.
2. The Supreme Court (in Loper Bright) recently told courts not to blindly trust agency interpretations and, as a result, the IRS did not receive the usual benefit of the doubt.

Outcome

the statute won, the IRS lost (for now).

Who should pay attention?

Anyone with pandemic-era tax activity (nationwide, not just disaster zones), including:

• Individuals or businesses hit with penalties or interest between 2020 and 2023
• Clients who paid large balances or went through audits
• Anyone in an installment agreement where balances ballooned during COVID

What years are in play?

Primarily 2019–2022 returns, but older liabilities may qualify if penalties or interest piled up during the pandemic window.

The risk vs. reward equation:

• Filing a claim: relatively cheap, preserves rights
• Not filing a claim: zero recovery guaranteed

This is one of those rare tax scenarios where doing nothing is the riskiest move. What you should have done yesterday (but today works):

1. Pull transcripts – find penalties and interest posted during the COVID period
2. Flag everything in that January 2020–July 2023 window
3. File protective claims (by July 10, 2026) for each affected year
4. Review collection cases before settling anything

Look at the files. Pull the transcripts. File the claims.

All that said, the quick reality check here is:

• This case has been appealed by the United States
• The IRS will push back
• Not every claim will win

The bottom line

File now, argue later. Not filing means no refund.

Kwong is the rare tax case that combines (i) big dollars, (ii) broad impact, and (iii) a ticking clock.

If Kwong holds up, clients will be eligible for refunds, but ONLY if you beat the clock. The clock is ticking, so reach out to any member of our Corporate and Tax Team to file a claim before it’s too late.