The IRS May Owe You a Refund of Penalties and Interest But Only if You Apply by July 10, 2026

Recent court decisions in Kwong v. United States (District Court) and Abdo v. Commissioner (United States Tax Court) appear to have paved the way for substantial refund opportunities. In those cases, the courts held under IRC Section 7508A(d), the IRS was statutorily required to computationally disregard the entire COVID-19 disaster period (January 20, 2020 through July 10, 2023) when calculating underpayment interest, failure-to-file penalties, and failure-to-pay penalties.

It goes straight to whether penalties, interest and possibly tax that you paid were ever legally due in the first place while this restriction was in place.

In practical terms, this means taxpayers who filed or paid "late" in 2021 or 2022 may not have been late at all and you should not have been penalized for late-filing your returns or paying the amount owed late, along with interest.

There are three immediate drivers of urgency:

The above cases open the door to refund claims or amended returns seeking abatement and repayment. But under the law we only have a certain amount of time to file such a claim or bring such a refund lawsuit.

When the law is unsettled, well-positioned taxpayers with good records and timely claims often obtain better outcomes than those who wait. Protective claims signal to the government that rights are being preserved and give practitioners room to negotiate or litigate later.

Both cases are up on appeal and the government may prevail on appeal or Congress may limit relief.

1. Allow us to review your case files to identify if you paid any applicable penalties and interest during the relevant period.
2. Allow us to pull IRS account transcripts to see if you have any late-filing and late-payment penalties during the relevant period, and the significant interest that flowed from those supposed delinquencies.
3. Consider granting us permission to file a protective refund claim. Where there is a plausible possible position and meaningful dollars at stake, we will be seeking your approval to file a protective claim (if the matter is not time barred). This will preserve the right to a refund.

Please be aware that the basis for claiming potential refunds remains in flux and that the government may prevail on appeal or Congress may grant relief. The Government may also issue some guidance supporting some limited relief, or none at all. Also, the primary purpose of the work we will perform initially, and the professional fees we will charge you for our time, will be incurred to try to preserve your rights to a potential refund, but we cannot guarantee any results.

While the above cases indicate that certain tax deadlines may have been "off" for over three years, the opportunity to correct what happened during that period won't stay open forever, and if you do not act fast your claim for a refund may be considered untimely and not paid. It is therefore incumbent upon you to act quickly and authorize us to research whether you may qualify for this relief.

If you are interested, please give us a call at 310-208-6200.