Kwong v. United States: Where COVID Penalty Refund Claims Stand
Kwong v. United States, decided by the U.S. Court of Federal Claims on November 25, 2025, read the COVID-19 disaster declaration as postponing federal tax deadlines from January 20, 2020, through July 10, 2023. More than 275,000 taxpayers then filed refund claims for COVID-era penalties and interest before the July 10, 2026, deadline, according to the National Taxpayer Advocate. The IRS has started responding. It is holding Kwong refund claims while the government appeals, sending “no consideration” letters on unpaid penalties, and denying some claims outright. On October 13, 2026, the National Taxpayer Advocate asked the IRS to pause the denials.
If you filed a Kwong claim in time, it stays on file while the appeal runs, and a letter from the IRS does not necessarily end it. But if you didn’t file, the window has generally closed for penalties paid more than two years ago. If you receive a formal denial, a two-year clock to take the claim to court generally starts on the date the IRS mails it by certified or registered mail.
Got a Kwong Letter From the IRS?
What Did Kwong v. United States Decide?
Kwong v. United States decided that the COVID-19 postponement of federal tax deadlines ran until July 10, 2023. The court was reading Section 7508A(d) of the tax code, the rule that automatically postpones deadlines after a federally declared disaster. As the court read the version in effect when COVID-19 was declared, the postponement ran from the start of the disaster’s incident period until 60 days after the incident period ended. The COVID-19 incident period ran from January 20, 2020, to May 11, 2023, so the court added 60 more days, landing on July 10, 2023.
The Court Ruled on a Lawsuit’s Deadline
Terry Kwong was challenging IRS penalties on his 2007, 2010, and 2011 returns. The IRS had denied his refund claims, and he sued on February 23, 2023. The government argued he had missed the two-year deadline to sue. Judge Molly R. Silfen held that the suit was timely because the COVID-19 postponement paused the deadline until July 10, 2023. She also found that an IRS regulation capping the postponement at one year misreads the statute.
The ruling addressed only the timing and left open whether Mr. Kwong’s penalties, or anyone else’s, were assessed correctly.
A Broader Reading Reaches Late Penalties
The National Taxpayer Advocate and many practitioners read the same postponement more broadly. If a filing or payment deadline fell inside the window, a return filed or a payment made by July 10, 2023, may count as on time, so late-filing penalties, late-payment penalties, and interest charged for that stretch may not have been owed. The usual three-year window to claim a refund then runs from July 10, 2023, which is where the July 10, 2026, deadline came from.
The IRS already accepts a much shorter version of this rule. When a claim cites the first 60 days of the disaster, January 20 through March 20, 2020, its July 2026 procedures direct staff to abate penalties and interest that began accruing in that stretch, whether paid or unpaid. The IRS ties that shorter window to Abdo v. Commissioner, a 2024 Tax Court decision. For penalties and interest that began accruing after March 20, 2020, the applicability of the postponement depends on the Kwong appeal.
Which Penalties Can a Kwong Claim Cover?
The core Kwong claims cover failure-to-file penalties, failure-to-pay penalties, and interest the IRS charged for returns or payments treated as late between January 20, 2020, and July 10, 2023. How you ask for that money back depends on whether you paid it.
Money Already Paid Needs a Refund Claim
If you paid the penalty or interest, getting it back takes a formal refund claim on Form 843. The IRS publishes filing instructions for claims that cite Kwong regarding fully paid amounts. Changes to your income, deductions, or credits for those years go on an amended return instead.
Balances Still Owed Follow a Separate Path
If you still owe the penalty, the IRS is not considering Kwong requests to remove it, except for penalties and interest that began accruing between January 20 and March 20, 2020, under internal procedures it issued in July 2026. Those requests get Letter 916C, the IRS’s no-consideration letter. Paying the balance later generally opens a two-year window to claim a refund of what you paid.
Kwong May Reach Information Return Penalties
The National Taxpayer Advocate said in April 2026 that the ruling may also affect taxpayers who filed international information returns late. That could include penalties for a late Form 5471, Form 3520 or Form 8938. Each of those claims depends on the facts of the late filing. FBAR penalties fall under Title 31 and are outside the disaster postponement rule.
What Happens to Kwong Claims After July 10?
A Kwong claim filed by July 10, 2026, is a protective IRS COVID refund claim: it keeps your refund window open while the courts decide whether the money is owed. Filing it does not produce a payment today.
The IRS Is Holding Kwong Refund Claims
Under procedures issued in July 2026, the IRS treats refund claims citing Kwong as protective and holds them pending resolution of the litigation. Those procedures call for Letter 86C, which tells the filer the IRS is holding the claim. If the appeals court upholds Kwong, a held claim can be reviewed on its merits; if the government wins, claims based on the longer window would generally fail.
Recent Payments May Still Qualify
If you missed July 10, 2026, the general refund deadline still applies: the later of three years from the filing of the return or two years from the payment of the tax or penalty. Say you paid a 2021 late-filing penalty in December 2024. Two years from that payment runs to December 2026, so a claim for that penalty may still be in time. Our Line 8 guide shows what to write on the claim.
What Does Your Kwong Letter From the IRS Mean?
The letter number indicates what the IRS did with your claim, and only a formal denial generally starts a deadline by which you must act.
Letter 86C Puts Your Claim on Hold
Letter 86C is a referral and holding letter. For Kwong claims, the IRS uses it to say it is holding the claim under Section 7508A(d) while the litigation continues. No deadline runs, and nothing is due.
Letter 916C Means the Claim Was Not Considered
The IRS describes Letter 916C as “Claim Incomplete for Processing; No Consideration.” It must explain why the claim was not considered, and for Kwong, it mostly concerns requests for unpaid penalties. The IRS does not send it by certified mail, and whether it starts the two-year clock to sue has not been settled.
Letter 105C or 106C Starts the Two-Year Clock
Letter 105C disallows a claim in full, and Letter 106C disallows it in part. Under Section 6532 of the tax code, the two-year period to file a refund lawsuit generally starts on the date the IRS mails a notice of disallowance by certified or registered mail. You can ask the IRS Independent Office of Appeals to review the denial, but neither that review nor a request to reconsider stops the two-year period. The only extension is a written agreement on Form 907.
This is the same two-year deadline as in the Kwong case.
The Taxpayer Advocate Asked for a Pause
Even though IRS procedures call for holding refund claims, some taxpayers have received denials. On October 13, 2026, National Taxpayer Advocate Erin Collins asked the IRS to identify taxpayers who received Kwong denial or no-consideration letters, review those decisions, correct them where appropriate, hold Kwong claims until the courts rule, and update its screening guidance before sending more. Her advice to anyone holding one of these letters: “do not ignore it, but don’t assume it necessarily ends the matter either.”
Where Does the Kwong Appeal Stand?
The government appealed Kwong to the U.S. Court of Appeals for the Federal Circuit, where the case was docketed on May 20, 2026, as No. 26-1843. In its opening brief, filed in September 2026, the government argues that the automatic postponement ended 60 days after January 20, 2020, the day the incident period began. As fallbacks, it argues for an end date of May 21, 2020, or a one-year cap at most.
Kwong’s answering brief is the next step, and no argument date has been reported. The IRS notes that the Court of Federal Claims decision is not precedential in any jurisdiction, so a Federal Circuit ruling is the next one that matters for held claims, and a further appeal could follow either way. If the government wins, a penalty may still qualify for first-time abatement or reasonable-cause relief on its own facts.
What Should You Do About Your Kwong Claim Now?
Three things protect a Kwong claim right now: proof you filed, the letter number, and the date any two-year clock started.
- Keep your proof of filing: Store the certified mail receipt or e-file confirmation for every claim you sent.
- Check the letter number: Letter 86C, Letter 916C, and Letter 105C or 106C each mean something different.
- Mark two years from any denial: Count from the date on Letter 105C or 106C, and remember that talking to the IRS does not pause it.
- Skip resubmitting a denied claim: Under IRS procedures, resubmitting the same claim with no new information results in it being closed without consideration.
- Pull your account transcript: An IRS account transcript shows which penalties and interest were charged, when, and whether they are paid.
- Look at penalties paid since late October 2024: These may still be within the two-year refund window.
Frequently Asked Questions about COVID Penalty Refund
Kwong refund claims for the period after March 20, 2020, are generally on hold pending the government’s appeal at the Federal Circuit. The IRS treats them as protective claims and plans to allow or deny them once the litigation resolves. Penalties and interest that began accruing between January 20 and March 20, 2020, are a separate case: the IRS abates those when a claim cites that stretch.
A Kwong denial does not necessarily end the claim. Letter 105C or 106C generally starts a two-year period to file a refund suit in federal court. You can also ask the IRS Independent Office of Appeals to review the denial, but that request does not pause the two-year period. The National Taxpayer Advocate has asked the IRS to review the Kwong denials it has already sent.
Whether a Letter 916C “no consideration” letter starts the two-year refund suit period under Section 6532 has not been settled for Kwong claims. The two-year period generally runs from the date a notice of disallowance is sent by certified or registered mail, and the IRS does not send Letter 916C that way. Have the letter reviewed before assuming either answer.
Missing the July 10, 2026, Kwong deadline generally closes the refund window for penalties paid more than two years ago. A COVID-era penalty paid within the last two years may still qualify under the general refund deadline, the later of three years from filing or two years from payment.
Kwong may incur late-filing penalties on international information returns such as Form 5471, Form 3520, and Form 8938, according to the National Taxpayer Advocate. FBAR penalties fall under Title 31, the Bank Secrecy Act, so the Kwong disaster postponement does not apply to them.
Talking to the IRS or asking it to reconsider does not pause the two-year Kwong refund suit deadline that follows a denial. Only a written agreement with the IRS on Form 907 extends it.
How Can Greenback Help With Your Kwong Claim?
If a Kwong letter has arrived, Greenback’s accountants can review the letter and your transcripts with you, confirm which penalties fall within the postponement window, mark the date on which any two-year clock runs out, and prepare a claim for any penalty still within the refund window. You’ll have peace of mind, knowing that your taxes were done right.
Not Sure Where Your Kwong Claim Stands?
Kwong v. United States is under appeal, and its outcome may change which claims succeed. Figures and procedures reflect information available as of October, 2026. The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
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