Kwong v. United States (179 Fed. Cl. 382, Nov. 2025) refund/abatement claims

[mh85251]

The suit is about disaster relief provisions enacted during the COVID-19 pandemic that suspended certain federal tax deadlines for more than three years — from January 20, 2020, through July 10, 2023.

The ruling affects failure to file, and failure to pay penalties, as well as ES penalties and underpayment interest accrued during that period.  The IRS has appealed the decision, so the law is still unsettled.  July 10, 2026 is the deadline to file a protective Form 843, to stop the statute of limitations.

I need to figure out how to query the homebase for years 2019 through 2022 to see who may have a claim. 

[Just-Lisa-Now-]

Many of my clients got unexpected penalty refunds automatically during those years.  Some told me, others didnt, Im not gonna try and track anything more down for anyone.

[BobKamman]

As I was saying,

https://accountants.intuit.com/community/tax-talk/discussion/kwong-may-be-quite-right-for-clients-wh... 

[IRonMaN]

And I thought this one was the sequel - King Kong vs Godzilla. 😉

[sjrcpa]

When did IRS file their appeal?

[BobKamman]

@sjrcpa The opinion was issued in November, but what I am reading says IRS has not yet appealed.  I'm still recovering from April 15, so I haven't looked into the status of the case, but usually appeals must be filed within a short time period after a final decision.  So, I suspect this is an interlocutory ruling and not a final appealable order.  I'll try to do some research.  

Meanwhile, the National Taxpayer Apologist Advocate blogged about this yesterday, and her fantasy is that

"The IRS should quickly develop a means to allow taxpayers to file their claims electronically and implement it immediately. The IRS and taxpayers do not need paper Forms 843 clogging up the system."

But meanwhile, she advises

"The IRS does not provide immediate confirmation it has received the claim. As a result, taxpayers are well advised to send their refund claims by certified mail so they can prove they timely submitted them in the event they are lost or misplaced."

So save all those receipts and tracking numbers from the returns you mailed just before April 15.  They don't prove the contents of the packages, so you can always claim that they were 843 forms.

https://www.taxpayeradvocate.irs.gov/news/nta-blog/tens-of-millions-of-taxpayers-may-be-eligible-for... 

[BobKamman]

So, this is what AI Slop tells me.  Good enough for now.  Obviously, delay benefits IRS because they would like the clock to run out. I'm not sure how the Kwong lawyers hope to benefit from this case; there are no class actions in federal tax refund practice.  Their client doesn't seem like someone who paid a lot of penalties.  If he's not wealthy, he'll be eligible for attorney fees, so that may be the motivation. 

As of May 2026, there has not yet been a final, appealable judgment entered in the Kwong v. United States case in the Court of Federal Claims, but the parties have taken steps to enable an appeal.

Status of the Case: In late 2025, Judge Molly Silfen* of the U.S. Court of Federal Claims ruled in favor of the taxpayer, holding that COVID-19 tax deadlines were automatically extended to July 10, 2023, under a 2019 statute.

Appealable Order Status: While the ruling is a significant victory, it is not yet a final, non-appealable judgment. As of March 2026, the parties indicated they were preparing a joint motion for a stipulated judgment, which would then allow the government to appeal to the U.S. Court of Appeals for the Federal Circuit.

Likelihood of Appeal: The IRS is widely expected to appeal this decision because it challenges their regulation capping disaster relief at one year, and the decision could require refunds of billions of dollars in penalties and interest.

-----

*Judge Silfen, 45, was appointed in February 2023 by President Biden.  Her undergraduate degree is from Yale (in Mechanical Engineering!), and her law degree is from Harvard.  

[BobKamman]

Also, those who choose to advocate rather than abdicate should look at the 2024 Tax Court Abdo case, especially if they are still in active collection status for amounts that include penalties and appeals.

In 2019, Congress enacted Section 7508A, which provides that, during federally declared disasters, certain tax deadlines are automatically suspended for the duration of the disaster period plus an additional 60 days. While the IRS had narrowly interpreted this section, in 2024 the United States Tax Court, in Abdo v. Commissioner, held that the postponement period is mandatory and self-executing; therefore, it invalidated IRS regulations that shortened the postponement period during the pandemic.

[sjrcpa]

@BobKamman Thanks. I had not seen where IRS filed an appeal, but haven't been following closely. 

[Taxes-by-Rocky]

Since I'm not a graduate of Mechanical Engineering, it would be wonderful if ProSeries tax software (for each prior year) could run a query, produce a report, and efile Form 843 for each taxpayer with penalties computed in the tax software.  I promise to review the filing before it goes out the door.

Viva Loper Bright!!

[BobKamman]

@Taxes-by-Rocky  My diagnosis is that it's another case of clientelephobia.  Fear of asking clients if they fit into a category, and whether they are interested in pursuing it (for a reasonable fee).  I can contact about 80% of my clients with an email blast, and the 20% who are offline generally aren't the ones to whom the questions would apply.  Why not show them that they can sleep well tonight, because you're awake to protect them from IRS?

[Taxes-by-Rocky]

Well underway.  What a nuisance!  I wanted the summer off!!

[jerry]

I'm back from post-tax-season vacation and trying to figure out what to do with Kwong

Is there a simple way in Lacerte to rapidly find the clients that paid 2210 penalties (and, I assume, underpayment penalties), or would I need to look at each client file individually (which I'm not willing to do....)

[sjrcpa]

Seminar I am in now says IRS appealed Kwong to the Federal Circuit on May 15, 2026.

[jerry]

Yes.

But protective claims are still due by 7/10/26.  

If the IRS loses the appeal, will they systematically reverse the penalties without an 843?  Unknown.

[BobKamman]

@jerry  You left out the third choice, of sending an email to all your clients asking if they think they might qualify.  The program might tell you which clients three or four years ago paid ES penalty, but how would it track FTP and interest?  It doesn't know, in many cases, when those were actually paid, especially on returns filed before they were your clients.  And are you taking new clients?  No way of knowing what they were doing back then, unless you ask.  

It's not that hard to send an email blast.  Even I can do it.  And even with my geriatric client list, about 80% of them now have email access.  

Many of your clients who have never paid IRS interest and penalties likely know someone who has.  I'm not sure I'd be looking for that kind of referrals, but you could at least point them in the right direction.  

[BobKamman]

---

@jerry wrote:

Yes.

But protective claims are still due by 7/10/26.  

If the IRS loses the appeal, will they systematically reverse the penalties without an 843?  Unknown.

---

Yes, there is a special $1.776 billion fund set aside to pay claims not otherwise collectible because they were not made before the statute expired.  It has something to do with a claim of erroneous IRS disclosure that was not made before the two-year statute on that expired.  

[jerry]

I just sat through an hour-long CE webinar on Kwong and that fund was not brought up ....

[jerry]

I don't have clients in my practice with failure-to-pay penalties.  But I have lots that pay underpayment penalties, often 4 figures or more.

I did find a Custom Lacerte report after I posted that shows how much underpayment penalty was calculated.  I'd have to pull IRS transcripts to get the exact amounts.

[BobKamman]

I don't think you need exact amounts for an 843 filing.  It has been a while since there was one of these, but as I recall you just have to enter "more than $1" and wait for resolution of the issue.  

[Taxes-by-Rocky]

I'm pretty sure that 1.776 fund provides audit protection as well. 🙂

[Taxes-by-Rocky]

For anyone who has had to do this before...

Recognizing that filing a 'protective claim for refund' v. an 'actual claim for refund' may follow two separate procedural paths, assuming that either filing makes clear disclosure of the law on which it relies (i.e., the word "KWONG" is reported prominently on the filing), what are the odds that:  (i) a claim for refund is simply paid (i.e., accepted upon receipt); and if so (ii) Treasury seeks its funds back, plus interest, should it win its appeal in the future?

The reason for the question is that, for many Form 843 filings, the refund amount will be known so it makes little sense to file a protective claim only to have to follow it up with a claim for refund a year later (assuming Treasury's appeal is heard and lost) and I realize something must be filed by 7/10/2026.

Thank you in advance.

[sjrcpa]

Word is that IRS will sit on these. If/when they look at them they will be denied. Then you have to appeal. Maybe Appeal of Kwong will be decided by then. Maybe not.

[BobKamman]

Here is what the Manual says:

21.5.3.4.7.3 (10-03-2022)

Protective Claims

1.     Protective Claims may be informal claims, formal claims, or amended returns for credit or refund normally based on expected changes in a Current Regulation, Pending legislation or, Current litigation.

 

2.      Any claim based on a pending court case or decision is considered a Protective Claim. A protective claim can be identified with a literal "protective claim" or similar language or verbiage related to current regulation or pending or current litigation on the claim itself. These claims are filed to protect the claimant's right to recover internal revenue tax before the expiration of the statute of limitations. For this reason, they are all considered to meet CAT-A criteria.

21.5.3.4.7.3.1 (05-05-2023)

Processing Protective Claims

1. Send all Protective Claims to Examination Classification. If the claim is processable, Exam Classification must make a determination on the claim.

   Note: 

   1.  Prior to forwarding to Examination Classification, ensure the claim is complete and timely.

2. Do not suspend Protective Claims in Accounts Management inventory, unless the claim is being held for additional information to become processable.

3. Protective Claims must be processable before sending to Examination Classification. A protective claim:

   • must have a written component;

   • must identify and describe the contingencies affecting the claim;

   • is sufficiently clear and definite to alert the IRS as to the essential nature of the claim;

   • must identify a specific year or years for which a refund is requested.

   • Screen all Protective Claims for:

     • Statute timeliness,

       Refer to IRM 25.6.1.10.3.3, Claims for Credit or Refund – General Time Period for Submitting a Claim, for additional information.

     • Signatures.

       4.10.11.2.1.3 (09-04-2020)
       Claims for Refund - Timeliness
       IRC 6402, permits the IRS to make a refund within the applicable period of limitations. IRC 6511 governs the time period for filing a claim as well as the amount that may be recovered.
       In general, a claim is filed on the date it is received at the place designated for filing by the IRS. See IRM 25.6.1.6.15, When a Document Is Treated As Filed Under the IRC, for the rules that may create a different filing date (e.g., Saturday, Sunday, and Legal Holiday rule). The hand-delivery of an amended return to an examiner who is examining the taxpayer’s returns may constitute the filing of a claim. See IRM 25.6.1.10.3.3.1.3, End of the Filing Period, for additional information.
       IRC 6511(a) provides the general rule that a claim for credit or refund must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. IRC 6511(b) limits the amount of the credit or refund to the amount paid within the 3 year (2 year) period before the date of a claim. See IRM 4.10.11.5.2, for further discussion on the timeliness requirements for claims for refund.
       In some instances, a claim may be filed by the taxpayer in anticipation of an expected change in the tax law, other legislation, regulations, case law, or other contingency. A "protective claim" is a claim for credit or refund filed by the taxpayer to preserve the right to pursue a refund based on the resolution of an issue contingent on future events that may not be determinable until after the refund statute has expired. Taxpayers file protective claims to ensure they meet the timeliness requirement. With regard to the requirements of form and content, a protective claim must be in writing, include the taxpayer’s name, address, TIN and signature, identify the contingency affecting the claim, be sufficiently clear and definite to alert the IRS as to the essential nature of the claim, and identify the specific year(s) for which the refund is sought. The exact amount of refund requested may not be known at the time the claim is filed. See IRM 25.6.1.10.3.2.5, Protective Claims, for additional information.
       Note: Protective claims filed with the campus are generally forwarded to Technical Services (through PSP) for suspense. The Technical Services Protective Claims Coordinator suspends the case until the contingency is resolved. At that point, if additional information is needed, the case is sent to a group (through PSP) for examination of the claim for refund. Other than noting the timeliness requirement was met by the filing of the protective claim prior to the RSED, there are no differences in how the examiner works the claim for refund. In the event a protective claim is initially filed with the examiner, the examiner should contact their local Technical Services Protective Claims Coordinator for guidance.

[jerry]

My understanding is that if a protective claim isn't filed by July 10, then any subsequent claim will be rejected because it won't be timely.

Correct?

I'm assuming all of them will be put in suspense until the IRS Court appeal is decided.  So what - if the IRS loses, then we can worry then about how the IRS handles it.  Maybe it will be IRS Appeals, maybe a different path.  The important part from my point of view is not giving the IRS an out by the claim not being timely.

I have lots of clients that paid 4-5 figures in Underpayment penalties for the affected years.  It'll be their call whether to pay me to file the claim, but I feel I have to offer them that option.

[BobKamman]

It's also your call if you want to charge a contingent fee, which is allowed under Circular 230.  Probably what I will do, because I don't want to be thought of as the guy who offered a procedure that just added injury to insult. 

§ 10.27 Fees.

(b) Contingent fees —
. . .
(3) A practitioner may charge a contingent fee for services rendered in connection with a claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the Internal Revenue Service.

[Taxes-by-Rocky]

Helpful.

Have used IRM enough in the past but only for cites/references.  Need to locate an overview course on it and spend some more time with it.  Thanks.

P.S.  Will bill but not likely on contingent basis.  The goodwill is worth more...

[BobKamman]

@Taxes-by-Rocky  Just do a search for "internal revenue manual" (in quotes) and whatever key words you think a bureaucrat might use.  Then go to links that look like excerpts, they have chapter and verse numbers like 23.10.7.1.18.  That usually gives you about ten times as much text as you want, so use "find" for key words.  IRS employees never do anything without detailed written instructions, and it's all public information except for the secret parts, that are blocked out with ==== ===== .

[TaxOpulence]

I’m a tax preparer as well and I know this would be a ton of work. I’ve joined the WonderTrust team which allows tax professionals to bring on their clients while they file the protective claims, they are giving us 17% of our clients refunds in the Kwong case if we win this thing. So far I’ve managed to bring in 500 clients. We have zoom calls daily so if you want to join our WonderTrust team you can do so here. [Link removed by Moderator]

[IRonMaN]

I'm just a bit curious why the link was removed to the TaxOpulence post rather than removing the whole post.