Video Breakdown Series — Part 3 of 5
In Parts 1 and 2 of our Kwong series, we explained what the ruling means and who is most likely to benefit. Now we get to the most actionable part: what do you actually do if you think you have Kwong-eligible penalties or interest on your account?
The answer, for most taxpayers, is to file what’s called a protective refund claim — and to do it before the statute of limitations runs out, which for many potential Kwong claims may be as early as July 10, 2026.
Here’s a step-by-step walkthrough of how to check your account, identify eligible charges, and file a protective claim the right way.
Step 1: Pull Your IRS Transcripts for 2019 Through 2022
The first thing you need to do is get a complete picture of what’s on your IRS account for the tax years most likely to be affected by Kwong — 2019, 2020, 2021, and 2022.
The tool you need is the Tax Account Transcript, available for free through the IRS’s “Get Transcript” portal at IRS.gov. Log in or create an IRS online account, verify your identity, and download the Tax Account Transcript for each of the four years in question.
If you’re not comfortable with the online portal, you can request transcripts by mail using Form 4506-T. Allow five to ten business days for delivery.
What you’re looking for in the transcripts are transaction codes that indicate penalty or interest assessments. The most relevant ones are Transaction Code 160 or 166 (failure-to-deposit penalty), Transaction Code 166 (failure-to-pay penalty), Transaction Code 276 (failure-to-pay penalty on estimated tax), Transaction Code 160 (failure-to-file penalty in some contexts), and interest assessments shown alongside these penalty codes. You’re also looking at the dates those charges were assessed — specifically whether they fall between January 20, 2020, and July 10, 2023.
If reading transcript codes feels overwhelming — they are written in a shorthand that takes time to learn — this is one area where having a tax professional pull and interpret your transcripts is genuinely worth the time.
Step 2: Identify the Amount at Stake
Once you’ve identified penalty and interest charges that fall within the COVID disaster window, add them up. This gives you a rough sense of your potential refund claim amount.
For individual taxpayers, these amounts often range from a few hundred dollars to a few thousand. For business owners — particularly those who went through audits, ERC-related adjustments, or had significant payroll tax issues during the pandemic years — the amounts can be substantially larger, sometimes tens of thousands of dollars or more.
The size of the potential refund helps you decide how aggressively to pursue the claim and whether the cost of professional assistance is justified by the potential recovery. For larger amounts, professional help is almost always worth it. For smaller amounts, you may be able to prepare a protective claim yourself using Form 843.
Step 3: Understand What a Protective Claim Is and Why It Matters
A protective refund claim is a formal filing with the IRS that preserves your right to a refund based on a legal theory that hasn’t yet been fully resolved. You’re essentially telling the IRS: “I believe I’m owed money under the Kwong ruling, and I’m filing this claim now to make sure the statute of limitations doesn’t expire while the appeal is pending.”
The IRS is not required to pay the claim immediately. In fact, they’re almost certainly going to deny it or hold it in suspense while the appeal of Kwong works its way through the courts. But by filing the claim now, you lock in your right to the refund if Kwong is ultimately upheld. If you don’t file and the statute of limitations expires, you lose that right forever — regardless of what the courts eventually decide.
Think of it like calling dibs on a potential refund while a legal question gets resolved. You’re not guaranteed to collect, but you’ve preserved the option.
Step 4: Prepare Form 843
The vehicle for a protective refund claim is Form 843, Claim for Refund and Request for Abatement. This is a two-page IRS form that asks for:
Your name, address, and Social Security number or Employer Identification Number. The tax period for which you’re claiming a refund (the specific year). The type of tax involved (income tax, employment tax, etc.). The amount of the refund you’re claiming. The type of penalty or interest you’re seeking a refund of. And a written explanation of the basis for your claim.
For a Kwong-based protective claim, the explanation section is critical. You need to clearly state that your claim is based on the Court of Federal Claims’ decision in Kwong v. United States, No. 23-267 (Fed. Cl. Nov. 25, 2025), and that you are filing a protective claim to preserve your refund rights while the government’s anticipated appeal is pending. You should specifically cite Section 7508A(d) of the Internal Revenue Code and explain how the COVID-19 disaster period suspension applies to the penalties and interest you’re claiming.
The more specific and legally grounded your explanation, the better positioned you are — both for IRS processing and for any subsequent litigation if the claim is denied.
Step 5: File the Claim Correctly
Form 843 is filed by mail — it cannot be submitted electronically. It should be sent to the IRS service center where you would normally file your tax return, or to the IRS service center that handled the original assessment you’re challenging.
Use certified mail with a return receipt so you have proof of the date it was received. Keep a complete copy of everything you submit.
You can file a separate Form 843 for each tax year where you have eligible charges, or in some cases combine multiple years on a single form if the claims are straightforward.
If you’re also currently in a dispute with the IRS — an installment agreement, an OIC, or an ongoing audit — filing a protective Kwong claim doesn’t automatically affect those proceedings. However, the IRS may factor it into the picture, and having a professional coordinate all the moving pieces is advisable.
What Happens After You File
After receiving your Form 843, the IRS will likely respond in one of a few ways. They may issue a formal denial — which is the expected response given that Kwong is under appeal and the IRS has not agreed with its interpretation. They may hold the claim in suspense pending the outcome of the appeal. Or, in rare cases, they may approve the claim.
A denial is not the end of the road. You can appeal an IRS denial of a refund claim to the IRS Office of Appeals. And if Appeals denies the claim, you can then file a refund lawsuit in federal court — either the U.S. Court of Federal Claims or a U.S. District Court.
For taxpayers with large claims, the litigation path may ultimately be how Kwong-based refunds are recovered. The IRS is not going to voluntarily write large refund checks based on a ruling it intends to appeal. The legal process will have to play out.
Should You File Now Even Though the Appeal Is Pending?
Yes — and this is the critical point. The statute of limitations for refund claims doesn’t pause while the government appeals Kwong. Time is passing. If the appeal takes two or three years to resolve and you haven’t filed a protective claim, you may find yourself in the position of being owed a refund under a vindicated legal theory but being time-barred from collecting it.
The cost of filing a protective claim is low — it’s a form and a few pages of explanation. The cost of not filing, if Kwong is upheld, could be the loss of a significant refund. From a risk management perspective, filing now is the clear choice for anyone with meaningful pandemic-era penalty or interest charges.
The Bottom Line of Part 3
If you have IRS penalty or interest charges from 2020 through mid-2023, here’s your action plan: pull your transcripts, identify eligible charges, calculate the potential refund amount, and file Form 843 as a protective claim citing Kwong before July 10, 2026.
In Part 4, we’ll explain the broader implications of Kwong beyond individual refunds — including what it means for the Employee Retention Credit, for taxpayers in IRS collections, and for ongoing tax disputes.
At Brightside Tax Relief, we are helping clients file protective Kwong claims right now. We know how to pull the right transcripts, identify eligible charges, and prepare a technically sound Form 843 that gives your claim the best possible foundation. Call us at 914-214-9127 or visit brightsidetaxrelief.com.
The information in this article is for general educational purposes only and does not constitute legal or tax advice. Kwong v. United States is subject to appeal and the legal landscape may change. Consult a qualified tax professional to evaluate your specific situation.
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