Key Points

• Tax Refunds May Be Available. After Kwong v. United States, taxpayers who paid interest or penalties that accrued during the COVID-19 pandemic may be entitled to refunds or abatement.
• The Window to Act Is Closing. Taxpayers generally have two years from the payment date to file a refund claim.
• Recent Court Decisions Have Expanded Taxpayer Rights. The Kwong decision builds on the 2024 United States Tax Court ruling in Abdo v. Commissioner, which held that the postponement provisions of Internal Revenue Code Section 7508A are mandatory and self-executing. Together, these decisions invalidate the IRS's narrow interpretation of pandemic-related tax relief.

Following a recent Court of Federal Claims decision, taxpayers may be able to seek tax refunds or abatement of interest and penalties assessed during the COVID-19 pandemic. Taxpayers who accrued interest or penalties between 2020 and 2023 should evaluate whether to file a refund claim or seek penalty or interest abatement.

Background

In Kwong v. United States, the Court of Federal Claims held that Internal Revenue Code Section 7508A(d) postponed federal tax deadlines during the COVID-19 pandemic because federal disaster declarations were in effect during that period, extending federal tax deadlines between January 20, 2020, and July 10, 2023, to July 10, 2023. Under Section 7508A, the Internal Revenue Service lacked authority to assess underpayment interest, failure-to-pay penalties and failure-to-file penalties during that period, and the time to file refund claims and United States Tax Court petitions was also suspended. As a result, businesses and individuals who accrued interest or penalties between 2020 and 2023 may be eligible to seek abatement or file refund claims.

Section 7508A, Abdo and Kwong

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. On March 13, 2020, President Donald Trump declared a nationwide emergency in response to the COVID-19 pandemic and approved major disaster declarations for all 50 states under the Stafford Act, identifying January 20, 2020, as the beginning of the COVID-19 disaster incident period. Subsequently, President Biden ended the disaster declarations on May 11, 2023.

In late 2025, Kwong reviewed the COVID-19 disaster timeline and held that the postponement period extended to July 10, 2023 (60 days after the May 11, 2023, end date as mandated by Section 7508A(d)). Thus, between January 20, 2020, and July 10, 2023, not only were filing deadlines postponed, but interest and penalties could not accrue and the statute of limitations for claiming credits or refunds was suspended.

Refund Statute of Limitations

Generally, taxpayers have the later of three years from the time a return was filed or two years from the time tax was paid to file a claim for credit or refund. Since more than two and a half years have passed since the end of the COVID-19 postponement period, most taxpayers will be precluded from filing refund claims. However, many taxpayers are potentially eligible to file refund claims or request abatement if, within the last two years, they paid interest and/or penalties that accrued during the postponement period.

The Takeaway

Given the strict statute of limitations for filing refund claims, taxpayers who, within the last two years, paid interest or penalties that accrued during the postponement period should act quickly. Additionally, taxpayers who accrued penalties or interest during the postponement period, but who have not paid them, have an opportunity to seek abatement. Affected businesses and individuals can consult with Fox Rothschild’s Tax Controversy and Litigation team to determine whether they are eligible to file refund claims or seek abatement before the applicable limitation periods expire.

For more information, please contact Matthew D. Lee at mlee@foxrothschild.com, Brian C. Bernhardt at bbernhardt@foxrothschild.com, or Jonathan M. Wasser at jwasser@foxrothschild.com.

This alert was featured in Investopedia.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.