If the COVID years felt confusing from a tax standpoint, you’re not alone. Deadlines moved. Notices arrived late. Payments were delayed. And for many taxpayers—individuals and business owners alike—that confusion led to penalties and interest that may not have been as clear-cut as they seemed at the time.
Now, a recent court case is raising an important question: Did the IRS inappropriately assess some taxpayers penalties and interest?
The Case That’s Turning Heads
In Kwong v. United States, the court took a closer look at how disaster relief rules applied during the COVID-19 pandemic. Specifically, the court examined Internal Revenue Code Section 7508A—the provision that allows the IRS to postpone certain tax deadlines during federally declared disasters.
The takeaway?
The court suggested that some deadlines may have been automatically extended during the COVID disaster period.
Why That Matters
If certain deadlines were extended by law, it raises a logical follow-up question: Were penalties and interest applied too aggressively during that time?
Think about it. If you were charged for:
- Filing late
- Paying late
- Carrying a balance that accrued interest
…those charges may have been based on deadlines that, under this interpretation, weren’t as rigid as originally enforced.
Now, to be clear—this doesn’t mean everyone is getting a refund. But it does mean something important: Some taxpayers may have a valid claim worth reviewing.
Who Should Take a Closer Look?
You may want to revisit your records if, during 2020 through part of 2023, you:
- Paid IRS penalties for late filing or late payment
- Paid interest on outstanding tax balances
- Received IRS notices tied to earlier tax years but resolved them during the COVID period
- Experienced disruptions that affected your ability to file or pay on time
- Operated a business that dealt with payroll tax or income tax timing challenges
This could apply to individuals, business owners, trusts, estates, and even nonprofits.
Why Timing Is Critical
Here’s where this shifts from “interesting” to urgent. Tax law operates on deadlines—and once those deadlines pass, opportunities can disappear. In this case, the date is July 10, 2026.
That’s the date being discussed as a potential cutoff for filing what’s known as a protective claim related to pandemic-era penalties and interest.
What’s a Protective Claim?
A protective claim is essentially a placeholder. It tells the IRS that “I may be entitled to a refund, but the law is still evolving—and I don’t want to lose my right to claim it.”
It doesn’t guarantee a refund.
But it preserves your ability to pursue one later if the legal landscape continues to shift in your favor.
What Should You Do Now?
This isn’t about rushing to file paperwork blindly. It’s about taking a measured, informed approach:
1.Review your IRS transcripts and notices
Look for penalties and interest assessed or paid during the COVID timeframe.
2.Connect the dots
Determine whether those charges relate to filing or payment deadlines that may have been impacted by pandemic relief rules.
3.Evaluate your options
If there’s a potential claim, a formal request—often using IRS Form 843—may be appropriate.
A Word of Caution
This is not a slam-dunk, across-the-board refund opportunity. The IRS may challenge or reinterpret the scope of this case. Not every situation will qualify. And filing an incomplete or incorrect claim could create more headaches than it solves.
In other words: This is not DIY territory for most taxpayers.
The Bottom Line
The COVID years created a perfect storm of tax confusion—and we’re still sorting through the aftermath. This latest development doesn’t guarantee refunds.
But it does create something far more important: A window of opportunity to review, evaluate, and potentially recover dollars you didn’t even realize were in question.
And like most opportunities in tax law – it comes with an expiration date.
If you paid IRS penalties or interest during the pandemic, now is the time to take a closer look.
You may not have a claim—but if you do, you’ll want to make sure you didn’t miss your chance to protect it.
If you need help with resolving a pandemic related tax problem, contact Saunders Tax & Accounting at http://www.saunderstax.com or call us at 301-714-2071. Open Monday – Thursday, 9 am to 5 pm. Awarded the Hagerstown Hot List 2026 and Hagerstown Chamber of Commerce “2023 Small Business of the Year” by providing a Less Taxing Life and More Prosperous Solutions since 1984!
