Video Breakdown Series — Part 2 of 5
In Part 1 of our Kwong series, we explained the basics of the case: a federal court ruled in November 2025 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 falling within that window, those charges may have been invalid — and a refund may be available.
Now for the question everyone wants answered: does this apply to me?
The honest answer is that Kwong doesn’t help everyone, and some taxpayers will benefit far more than others. In this post, we’re breaking down exactly which types of taxpayers and penalties are most likely covered — and which situations fall outside the ruling’s reach.
The Core Question: Did You Pay Penalties or Interest Between January 2020 and July 2023?
The starting point is straightforward. Pull up your IRS account or tax transcripts for the years 2019 through 2022. Look for any of the following types of charges that were assessed or paid during the period from January 20, 2020, through July 10, 2023:
Failure-to-file penalties (charged when a return is filed after its due date), failure-to-pay penalties (charged when taxes owed are not paid by the due date), underpayment interest (the daily interest the IRS charges on unpaid balances), and estimated tax penalties (charged when quarterly estimated payments were insufficient).
If you see any of these on your account for tax years 2019, 2020, 2021, or 2022 — and they were assessed or collected during the COVID disaster window — the Kwong ruling may give you grounds to seek a refund.
Individual Taxpayers: The Most Common Qualifying Scenarios
You filed your 2019, 2020, 2021, or 2022 return late and were charged a failure-to-file penalty.
Under the Kwong interpretation, the statutory deadline to file those returns was suspended during the COVID disaster period. A return filed in 2021 or 2022 may not have been late at all under this theory. If the IRS assessed a failure-to-file penalty on such a return, that penalty may have been legally invalid.
You paid your taxes late and were charged a failure-to-pay penalty.
Same logic applies. If the due date for payment was suspended until July 10, 2023, failure-to-pay penalties that accrued before that date may have been improperly assessed.
You were charged underpayment interest on a tax balance during the pandemic years.
Section 7508A explicitly suspends the accrual of interest during the disaster period. Underpayment interest that accrued between January 20, 2020, and July 10, 2023, may be refundable under the Kwong theory.
You received a tax refund that should have included overpayment interest, but the IRS reduced or denied that interest.
The suspension of interest also works in the other direction. If you overpaid your taxes and the IRS owed you interest on a delayed refund, but calculated that interest using a narrow window rather than the full extended period, you may be owed additional overpayment interest.
Small Business Owners and Self-Employed Individuals
Business owners and self-employed taxpayers are among the most likely to have significant Kwong-related refund opportunities, for a few reasons.
First, self-employed individuals are responsible for making quarterly estimated payments — and falling short on those payments results in estimated tax penalties. If those penalties were assessed during the COVID period, they may be refundable.
Second, businesses that went through IRS audits during the pandemic years and paid additional tax, penalties, and interest as a result of those audits may have paid interest that accrued during the suspended period. That interest may be recoverable.
Third, businesses that received Employee Retention Credits (ERC) and were required to reduce their wage deductions on amended returns — resulting in additional tax assessments with associated interest — may have a strong Kwong-based argument for relief. This is a particularly active area of analysis among tax professionals right now, and the potential refunds for businesses in this situation can be substantial.
U.S. Taxpayers Living Abroad
American citizens and green card holders living outside the United States are another group with potentially significant Kwong exposure. Overseas filers often discover unfiled tax obligations years after the fact, and many caught up on back filings during the 2020–2023 window. If penalties were assessed on those late filings, the Kwong ruling may provide grounds for a refund — or for arguing that the filings were not actually late at all.
The IRS’s streamlined offshore procedures, which many expats used during this period to come into compliance, involved paying penalties as a condition of the program. Whether Kwong affects those penalty payments is an unsettled question, but it’s one worth evaluating.
Taxpayers Who Went Through IRS Collections During the Pandemic
If you had an existing tax debt that was being actively collected during the COVID period — with interest and failure-to-pay penalties continuing to accumulate — you may have a refund claim for the portion of those charges that accrued during the disaster window.
This is also relevant in a different direction: if the IRS is currently attempting to collect penalties and interest from you that were assessed during the disaster period, Kwong may provide a defense. Those charges may simply be legally invalid, which changes the negotiation position significantly.
Who Is Least Likely to Benefit
It’s equally important to be clear about who Kwong probably doesn’t help.
Taxpayers whose penalties were assessed for tax years entirely outside the 2020–2023 window. If your penalty related to a 2017 or 2018 return and was fully assessed and paid before January 20, 2020, the Kwong ruling doesn’t apply.
Taxpayers who already received full penalty abatement through other means. If the IRS already removed your penalties through first-time abatement or reasonable cause abatement, there’s nothing left to recover through Kwong.
Taxpayers whose situations involve fraud penalties. The Kwong ruling relates to failure-to-file, failure-to-pay, and underpayment interest — not civil fraud penalties, which are treated differently under the tax code.
Taxpayers in states where the Federal Circuit hasn’t weighed in. Because Kwong is a Court of Federal Claims decision and hasn’t been affirmed by a higher court, some jurisdictions may not follow its reasoning. The legal landscape is still developing.
The Statute of Limitations Urgency
Here’s the critical timing issue that makes acting now so important. Under the Kwong theory, the COVID disaster period extended certain tax deadlines to July 10, 2023. The statute of limitations for filing a refund claim is generally three years from the date of that extended deadline — which means the window for many Kwong-based refund claims may close around July 10, 2026.
That is approximately three months away from the date this is being written. For taxpayers with significant pandemic-era penalties or interest, the time to evaluate and file a protective claim is now — not after the appeal is resolved, because by then the statute of limitations may have expired.
Filing a protective refund claim doesn’t guarantee you’ll receive a refund. But it preserves your right to one if the Kwong ruling is upheld on appeal. Waiting risks losing that right entirely.
The Bottom Line of Part 2
The taxpayers most likely to benefit from Kwong are those who paid failure-to-file penalties, failure-to-pay penalties, or underpayment interest on tax obligations for years 2019 through 2022, where those charges were assessed or collected between January 20, 2020, and July 10, 2023. Businesses with ERC-related interest assessments and self-employed individuals with estimated tax penalties are also high on the list.
In Part 3, we’ll walk through exactly how to check your own IRS account to find out whether you have Kwong-eligible charges — and what a protective refund claim looks like.
At Brightside Tax Relief, we are reviewing client accounts and transcripts for Kwong eligibility right now. The clock is running. Call us at 914-214-9127 or visit brightsidetaxrelief.com to get your account reviewed before the window closes.
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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