During the COVID-19 pandemic, the federal government provided broad relief for many taxpayers. At the time, most taxpayers experienced this relief through IRS announcements that extended filing and payment deadlines. A recent court decision, however, calls into question whether that relief should have lasted much longer, and whether interest and penalties charged during the pandemic were proper in the first place.

In late 2025, the U.S. Court of Federal Claims issued a decision in Kwong v. United States(Opens a new window) that has drawn significant attention in the tax community. While the case itself involved a procedural question about whether a taxpayer’s refund lawsuit was timely, the court’s underlying reasoning has much broader implications for taxpayers who were charged interest or penalties during the COVID-19 period.

The decision suggests that, under the law in effect when COVID-19 was declared a national disaster, certain federal tax deadlines were automatically paused for the entire duration of the disaster – not just for the limited periods announced by the IRS. Because interest and penalties are tied directly to when a tax is treated as “due,” this interpretation opens the door to potential refunds or abatements for some taxpayers.

What the court decided 

When an emergency declaration was issued for COVID-19, the tax code contained a provision that automatically suspended certain tax deadlines while a federally declared disaster was ongoing. Unlike discretionary relief issued by the IRS, this suspension was written directly into the statute.

In Kwong, the court concluded that the COVID-19 disaster period legally began on Jan. 20, 2020 and did not end until May 11, 2023, when the federal government formally closed the disaster declaration. Under the statute, tax deadlines tied to that disaster were paused for the entire incident period plus an additional 60 days, meaning the suspension ran through July 10, 2023.

The IRS took the position that the relief should be limited to the shorter windows it announced during the pandemic. The court rejected that approach, holding that the statute itself, not IRS guidance, controlled how long the suspension lasted. The court also ruled that later changes to the law in 2021 could not be applied retroactively to COVID-19.

Why this matters for taxpayers

Interest and many penalties begin accruing based on an original due date of the tax liability. If a due date is legally postponed, interest and penalties based on the earlier date may have been assessed incorrectly.

This is why the Kwong decision is not limited to a single tax year. It can affect any filing or payment obligation that was originally due between Jan. 20, 2020 and July 10, 2023. In practical terms, that includes common deadlines tied to tax years 2019, 2020, 2021, and even some obligations related to 2022 returns.

Examples of how this can apply

The following examples illustrate situations where taxpayers may want to take a closer look. These examples are simplified and meant to show how the issue arises and is potentially resolved. No specific results are promised or assured by them.

• Example 1: 2019 individual return paid late

 A taxpayer owed money with their 2019 federal return, which was originally due in April 2020. The balance was paid later in 2020, and the IRS charged interest and late payment penalties starting from the April due date.

Because that due date fell during the COVID-19 disaster period identified by the court, there may be a basis to argue that interest and penalties should not have begun accruing at that time. Depending on timing and refund statute limits, a refund or abatement request may be worth exploring.

• Example 2: Business taxes paid in 2022 for a 2020 or 2021 year

Many businesses carried unpaid balances for 2020 or 2021 returns into later years. In some cases, balances were paid in 2022 after interest and penalties had accumulated for months or even years.

If the original payment due date for those balances fell between 2020 and mid-2023, the court’s reasoning raises questions about whether those charges were properly calculated. For businesses with significant balances, the dollars involved can be material and potential refund opportunities should be explored.

• Example 3: Taxes paid in 2023

Surprisingly, the court’s interpretation extends far into 2023. For example, many 2022 tax returns were due in April 2023 – still within the COVID-19 suspension window identified by the court.

In certain situations, interest or penalties charged on balances tied to those due dates may also require review, even though practically speaking the pandemic had subsided by that point.

Why this is surfacing now

During the pandemic, most taxpayers understandably focused on immediate filing extensions and cash-flow management. Few formally questioned whether the disaster relief statutes extended further than what the IRS announced at the time.

The Kwong decision is one of the first to squarely address that issue. It has prompted renewed interest because it relies on the wording of the statute itself, not on discretionary guidance. As a result, it has broader potential reach than many temporary COVID-era IRS notices.

Not every taxpayer will benefit from this decision. Whether a refund or abatement is available depends on several factors, including, but not limited to:

• the date the tax was originally due;
• the date the tax was paid;
• the type of interest or penalty assessed; and
• whether the applicable statute of limitations remains open.
  
  

In some cases, taxpayers may consider filing a protective refund claim to preserve their rights while the issue continues to develop. This can be especially important where significant interest or penalties were paid in the past two years.

The government may appeal the Kwong decision or attempt to limit its application. The IRS has not issued broad guidance adopting the court’s interpretation. As a result, taxpayers are not guaranteed success on their refund claims and outcomes will vary based on specific facts and circumstances.

That said, the decision has enough substance that we would encourage taxpayers with meaningful COVID-era interest and penalty charges to review their accounts rather than assume the matter is closed.

How to request a refund or abatement

Taxpayers seeking relief under Kwong will follow one of two paths depending on their situation. Those who already paid penalties or interest during the COVID disaster period should file Form 843 (Claim for Refund and Request for Abatement) with the IRS, while those who have unpaid penalties and/or interest can seek abatement using the ruling as justification. In either case, given the government's expected appeal, filing a protective claim now is strongly advised to preserve your rights before the July 10, 2026 deadline.

What does CohnReznick think?

A federal court has said that certain COVID-era tax deadlines were paused far longer than the IRS allowed at the time. Because interest and penalties are driven by those deadlines, some taxpayers may have paid amounts they did not actually owe. Taxpayers who incurred significant IRS interest or late-payment penalties between 2020 and 2023 may want to evaluate whether the Kwong decision affects them and should do so before refund deadlines expire.

^{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}