Kwong v. United States – Potential Refund/Abatement Opportunities

Based upon a recent federal court decision, Kwong v. United States, taxpayers (including individuals, businesses, trusts and estates) may have an opportunity to request a refund or abatement of certain penalties and interest charged by the IRS during the COVID-19 disaster period. Essentially, the court determined that the applicable disaster period ran from January 20, 2020, through July 10, 2023, and, thus, certain tax deadlines were postponed during this period. The result for many taxpayers is that the period for claiming a refund or abatement of penalties and interest assessed during this period likely will end on July 10, 2026.

It is important to note that this is a developing area, and the filing of a refund or abatement request does not guarantee that the requested refund or abatement will be accepted. The IRS has the right to appeal the decision, and the courts may ultimately reverse or narrow the scope of the federal court’s ruling.

Some of the more common penalties and interest that may be eligible for refund or abatement include late filing and/or payment penalties and interest for income and employment tax returns, penalties for underpayment of estimated tax, and late-filing penalties for certain information returns. Although this mainly impacts tax returns filed for the 2019-2023 tax years, certain interest and penalties from older years that were still outstanding during the postponement period may be eligible for partial relief (e.g. IRS audit assessments that include penalties and interest accrued during the postponement period).

Due to the limited period within which most taxpayers have to submit a timely refund claim, there are some actions that you should take immediately to avoid a last-minute rush to submit a timely claim.

1. Review prior IRS notices and other correspondence received.
2. Request IRS Account Transcripts for relevant years and review for any penalties and interest assessed and/or paid. The quickest way to access these transcripts is through an IRS Online Account. If you have not yet created an account, you can do so at https://www.irs.gov/your-account.

If you have any questions regarding how this might apply to your tax situation, please contact your tax advisor.

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