IRS appeals Kwong as advocate says refunds may be at stake

The IRS has appealed the decision in Kwong, 179 Fed. Cl. 382 (2025), in which the Court of Federal Claims held that the filing deadline for refund claims for penalties and interest was automatically extended by Sec. 7508A(d) due to the COVID-19 disaster declaration. The national taxpayer advocate said the ruling may allow some taxpayers to claim tax refunds for the years 2019 through 2022, but she emphasized that the law remains unsettled.

The notice of appeal in Kwong, which did not include a brief outlining the IRS’s position, was filed this month in the U.S. Court of Appeals for the Federal Circuit. The appeal follows the Court of Federal Claims’ decision, in which the court held that Sec. 7508A(d) suspended filing and payment deadlines during the COVID-19 disaster period. As a result, those deadlines were in some cases extended through July 10, 2023.

In a blog post published Thursday, National Taxpayer Advocate Erin Collins said the decision could have implications beyond penalties and interest, including whether some taxpayers still have time to file refund claims for tax years 2019 through 2022.

“Similar issues are being raised in pending litigation, and future court decisions could expand, narrow, distinguish, or reject aspects or implications of Kwong,” Collins said. “Taxpayers should carefully evaluate their individual circumstances before filing claims based on the court’s reasoning. Even though the law is still developing, many taxpayers may need to act on or before July 10, 2026, to protect potential refund rights while the courts continue deciding these issues.”

Under the court’s reasoning in Kwong, certain periods during the COVID-19 disaster — from Jan. 20, 2020, through July 10, 2023 — could be disregarded under Sec. 7508A(d)(1) when determining filing deadlines. Some taxpayers may argue that this interpretation effectively extends the time limits for filing refund claims tied to those years.

That could affect taxpayers who have not yet filed returns or who may benefit from filing amended returns, Collins said. In some cases, individuals whose claims would otherwise be barred by the usual three-year statute of limitation may still seek refunds if courts ultimately adopt the broader interpretation.

She gave the hypothetical example of a taxpayer who had taxes withheld from wages in 2020 but never filed a 2020 return. This taxpayer may ordinarily have lost the ability to claim a refund after the normal three-year period expired. But the Kwong decision means that taxpayer may still wish to consider filing a claim on or before July 10, she said.

The potential impact is not limited to penalties or interest, Collins said. The reasoning could also raise questions about eligibility for certain credits or other tax benefits tied to filing deadlines, including those related to stimulus payments and refundable credits, she said. But those issues have not been resolved, and the courts could view the issue differently, she said.

The government has taken a narrower view of Sec. 7508A(d), arguing in its Action on Decision regarding a similar case (Abdo, 162 T.C. 148 (2024)) that the provision does not suspend deadlines as broadly as the Tax Court has held. Instead, the IRS has said the provision gives the Treasury secretary discretion to determine which deadlines are postponed and for how long.

The IRS has a deadline of July 20 to file its brief in the Kwong appeal.

Meanwhile, taxpayers may wish to file refund claims or protective claims on or before July 10, depending on their individual circumstances, Collins said. A protective claim allows taxpayers to preserve their right to a refund while legal questions are still being resolved. However, Collins said, filing a claim does not guarantee the IRS will allow it, and some claims may face additional review.

Deadlines can vary depending on factors such as when a taxpayer filed a return or made payments, she said, adding that individuals should carefully evaluate their situation.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.