Tax Professionals Should Review Clients Now for Potential Kwong Refund Claims

A recent court decision has created an important opportunity that tax professionals should be reviewing with their clients now.

The case is Kwong v. United States, and it may affect taxpayers who were assessed certain IRS penalties or interest tied to filing and payment deadlines during the COVID federal disaster period.

This is not something tax professionals should wait on.

For many taxpayers, the deadline to preserve a claim may be July 10, 2026, but that does not mean firms should wait until July to start reviewing client accounts. These cases take time to identify, evaluate and prepare correctly. If you want help determining whether your clients may qualify, we need to be talking about those cases by June.

Why Kwong matters

The Kwong decision focuses on how certain federal tax deadlines were treated during the COVID federal disaster period.

The National Taxpayer Advocate has explained that under the reasoning of Kwong, filing and payment deadlines that fell between January 20, 2020 and July 10, 2023 may have been automatically postponed during that period. If that reasoning ultimately controls, some taxpayers may be entitled to refunds or abatements of certain penalties and interest that were assessed during the COVID period.

That could include failure to file penalties, failure to pay penalties, certain estimated tax penalties and related interest. The issue may affect individuals, businesses, estates, trusts and other taxpayers.

The key point is that relief is not automatic.

In most cases, taxpayers will need to file a claim to protect their rights. The National Taxpayer Advocate has stated that most taxpayers will need to file claims by July 10, 2026, generally using Form 843, Claim for Refund and Request for Abatement.

Why tax professionals should be checking now

Tax professionals are in a unique position to help clients avoid missing this opportunity.

Many taxpayers will not know how to identify whether they were assessed penalties or interest during the relevant period. They may not know how to read their transcripts, review notices or determine whether a protective claim makes sense.

That is where proactive review matters.

If you work with clients who had late filed returns, late payments, estimated tax penalties, IRS notices or balances tied to the COVID period, those accounts should be reviewed sooner rather than later.

This is especially important because the IRS and the government may continue to challenge the broader application of Kwong. The National Taxpayer Advocate has noted that the government disagrees with this interpretation and that the issue may take years to resolve through the courts.

That uncertainty is exactly why protective claims may matter. A protective claim can help preserve a taxpayer’s right to a refund while the legal issue is still unresolved.

What tax professionals should look for

This review should start with clients who had IRS penalties, interest or unresolved balances connected to tax years affected by the COVID period.

Some clients may have paid penalties and interest without realizing there may now be a refund claim to consider. Others may still have unpaid penalties or interest sitting on their account and may need an abatement request instead.

Tax professionals should also remember that Form 843 is a targeted form. It is used to request refunds or abatements of certain taxes, interest, penalties, fees and additions to tax. It is not used as a general amended income tax return.

That distinction matters because these claims need to be reviewed and prepared carefully.

Why June matters

The July 10 deadline is important, but waiting until July creates unnecessary risk.

Tax professionals need time to identify affected clients, pull transcripts, review penalties and interest, determine whether a refund or abatement claim may apply and prepare the necessary paperwork.

For clients with multiple years, larger balances or complex account history, this is not a last minute project.

If you believe your clients may qualify, June is the time to start the conversation.

The key takeaway

Kwong v. United States may create a meaningful refund or abatement opportunity for taxpayers who were assessed certain penalties or interest during the COVID period.

But the opportunity is time sensitive.

Tax professionals should not assume clients will know about this or understand how to act on it. They need guidance, review and a clear next step.

If you have clients who may have been assessed IRS penalties or interest during the COVID period, reach out now. We can help review the situation, determine whether there may be a claim to consider and work toward the right next step before the July 10 deadline.

To give us time to help properly, please send potential cases by June.

Contact our team here, we look forward to working with you!