Video Breakdown Series — Part 1 of 5
If you paid IRS penalties or interest on taxes related to the years 2020 through 2023, there is a federal court ruling decided in November 2025 that you need to know about. It’s called Kwong v. United States, and it may be one of the most significant tax court decisions affecting ordinary Americans in years.
This is Part 1 of our five-part breakdown of the case. We’re going to explain exactly what happened, what the court decided, why it matters, and — most importantly — what it might mean for your own tax situation. Let’s start from the beginning.
Who Is Terry Kwong and What Was His Case About?
Terry Kwong is a taxpayer who had outstanding penalty balances for several older tax years — specifically 2007, 2010, 2011, 2015, and 2016. The IRS had used overpayments on other returns to satisfy those amounts. In 2020, Kwong filed administrative claims with the IRS seeking refunds of those penalty payments.
In September and October of 2020 — right in the middle of the COVID-19 pandemic — the IRS mailed notices disallowing his refund claims. Under normal tax law, once the IRS disallows a refund claim, you have exactly two years to file a lawsuit in federal court challenging that decision.
Kwong filed his lawsuit in February 2023. That was two years and three months after the IRS mailed the disallowance notices — outside the two-year window by about 90 days.
The government argued his case should be thrown out as untimely. Kwong argued that the COVID-19 pandemic had legally extended his deadline to file suit. The U.S. Court of Federal Claims had to decide: was his lawsuit timely or not?
The Law at the Center of Everything: Section 7508A
To understand the ruling, you need to understand a provision of the tax code called Section 7508A. This is the section of the Internal Revenue Code that gives Congress — and by extension the IRS — the authority to extend tax deadlines during federally declared disasters.
Here’s the critical piece: in 2019, Congress amended Section 7508A(d) to make certain disaster relief mandatory. The pre-2021 version of that provision stated that during a federally declared disaster, the postponement period begins on “the earliest incident date” of the disaster and ends on “the date which is 60 days after the latest incident date.”
COVID-19 was declared a federal disaster beginning January 20, 2020. The national emergency officially ended on May 11, 2023. Add 60 days to May 11, 2023, and you get July 10, 2023.
Kwong’s argument was straightforward: Section 7508A(d) automatically suspended his two-year deadline to file suit for the entire duration of the COVID disaster period — from January 20, 2020, through July 10, 2023. Since the IRS mailed its disallowance notices in September and October 2020, and the suspension covered that entire period, his February 2023 filing was timely.
What the Court Decided
On November 25, 2025, the U.S. Court of Federal Claims sided with Kwong.
The court held that Section 7508A(d), as written before Congress amended it in November 2021, mandated an automatic suspension of certain federal tax deadlines for the entire duration of the COVID-19 disaster period — from January 20, 2020, through July 10, 2023. The court rejected the government’s argument that the IRS could limit this relief to shorter periods through its own guidance.
The court also specifically rejected a Treasury Regulation that had capped the mandatory 60-day postponement at a maximum of one year. The court found that this regulation “misread” the statute and that the plain text of the law — not agency guidance — controlled. This part of the ruling is particularly significant because it relied on the Supreme Court’s 2024 decision in Loper Bright Enterprises, which curtailed courts’ deference to agency interpretations of ambiguous statutes.
The court concluded that Kwong’s lawsuit was timely. His deadline had been suspended during the COVID period, and his February 2023 filing fell within the extended window.
Why This Decision Is So Much Bigger Than One Taxpayer’s Case
Here’s where it gets important for everyone reading this. While the Kwong case was technically about whether one taxpayer’s refund lawsuit was filed on time, the court’s reasoning went much further.
The court’s interpretation of Section 7508A(d) — that it mandated an automatic suspension of federal tax deadlines during the entire COVID disaster period — has implications that extend far beyond just the statute of limitations for filing refund lawsuits.
If federal tax deadlines were legally suspended from January 20, 2020, through July 10, 2023, then penalties that the IRS assessed for things like late filing and late payment during that period may have been assessed in error. After all, if the deadline to file or pay was legally pushed back to July 10, 2023, then a return filed in 2021 or 2022 wasn’t actually late. And if it wasn’t late, any penalty the IRS charged for it was legally invalid.
Similarly, underpayment interest that accrued during this period may have been improperly charged, because the law suspended the accrual of these obligations during a disaster period.
The potential scope of this ruling is enormous. Tax attorneys and accountants across the country are calling it a landmark decision, and the IRS is widely expected to appeal it. But for now, it stands — and for taxpayers who paid IRS penalties or interest between 2020 and mid-2023, it may represent a significant refund opportunity.
Who Decided This and Where Does It Stand Now?
The U.S. Court of Federal Claims is a specialized federal court that handles financial claims against the federal government, including tax refund suits. It is not the Tax Court or a district court — it has its own jurisdiction and its own procedures.
The government is widely expected to appeal the ruling to the U.S. Court of Appeals for the Federal Circuit. Until that appeal is resolved — and potentially further up to the Supreme Court — Kwong represents one court’s interpretation of the law. It is not yet settled precedent binding on all courts.
That uncertainty is real, and anyone pursuing refund claims based on Kwong should understand that the legal landscape may shift. However, the potential dollars involved — for individual taxpayers and for businesses that paid substantial penalties during the pandemic years — are significant enough that many tax professionals are recommending immediate action to preserve refund rights while the legal battle plays out.
What This Means in Plain English
The bottom line of Part 1: A federal court has ruled that COVID-19 legally extended most federal tax deadlines from January 20, 2020, through July 10, 2023. If the IRS charged you penalties or interest for tax obligations that fell within that window, those charges may have been invalid — and you may be entitled to a refund.
The window to file a protective claim to preserve your refund rights may be as short as July 10, 2026. Time is already running.
In Part 2, we’ll dig into the specific types of penalties and interest that are covered under this ruling — and which taxpayers are most likely to benefit.
At Brightside Tax Relief, we are actively reviewing client accounts for Kwong-related refund opportunities. Call us today at 914-214-9127 or visit brightsidetaxrelief.com to find out if the Kwong ruling could put money back in your pocket.
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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