The federal case Kwong v. United States has been seen as one of the most impactful tax rulings tied to the COVID-19 pandemic for individuals, businesses, and non-profits. Decided by the U.S. Court of Federal Claims, this tax case addresses whether taxpayers may be entitled to obtain refunds for penalties and interest that were assessed by the Internal Revenue Service during a period when normal tax deadlines were disrupted, including during the COVID-19 pandemic.
For individuals and businesses throughout the United States, including New Jersey and Yonkers, NY, this decision creates a significant opportunity for them to recover funds that may have been improperly charged during the pandemic.
Overview of the Kwong v. United States Case
The dispute in the Kwong v. United States case is focused on the interpretation of Internal Revenue Code Section 7508A, which allows the federal government to postpone certain tax deadlines during federally declared disasters, such as pandemics. When COVID-19 was declared a national emergency in 2020, the IRS issued guidance that extended some filing and payment deadlines for individuals, business owners, and nonprofit organizations. However, those extensions for filing taxes were limited in scope and duration.
In this case, the court had a broader view of the law when determining a verdict. The court found that the statutory language in IR Code Section 7508A required a more expansive suspension of tax filing deadlines than what the IRS implemented. Rather than limiting tax deadline relief to select dates, the court came to the conclusion that the entire pandemic period should have been considered when determining whether penalties and interest were validly imposed on those who missed the deadline.
This interpretation of the code significantly expands the time frame in which taxpayers may have been protected from certain IRS enforcement actions.
Legal Impact of the Court’s Decision
At the center of the court’s ruling is the idea that statutory disaster relief provisions take precedence over narrower administrative guidance and protocol. The court determined that if deadlines were effectively suspended during the entire COVID-19 disaster period, then penalties that were tied to those deadlines may not have been enforceable.
This includes several common IRS charges, such as:
- Failure-to-file penalties
- Failure-to-pay penalties
- Accrued interest on late payments
- Interest tied to underpayment of taxes
If these charges were assessed during the applicable COVID disaster window, taxpayers may have grounds to request refunds or abatements from the IRS for any payments made for tax enforcement penalties.
The decision by the court highlights a broader legal principle that the IRS must operate within the boundaries of the law as written by Congress. When statutory language provides relief to taxpayers, administrative agencies cannot restrict that relief beyond what the law allows.
Can I Get IRS Penalties Refunded From COVID?
The Kwong v. United States decision makes it possible for many different types of taxpayers to pursue a refund for penalties and interest they accrued. For many taxpayers wondering, “can I get IRS penalties refunded from COVID,” the answer may be yes if those penalties are tied to COVID-era tax obligations. Eligibility depends on the specific facts of each case, which is why having an experienced tax attorney near you review your documentation and case is important.
Taxpayers who have paid penalties or interest during the pandemic period may qualify for refunds if those charges were connected to missed deadlines that fall within the federally recognized disaster period. This includes certain situations where:
- Tax returns were filed late
- Payments were delayed
- Balances remained unpaid due to financial or operational disruptions caused by COVID-19
For individual persons who have been penalized, this may involve recovering failure-to-file or failure-to-pay penalties that were implemented during a time when normal tax compliance was difficult. For businesses, the potential compensation recovery can be even more significant, especially when large balances owed to the IRS led to substantial interest accumulation or repeated penalty assessments.
However, refunds for penalties accrued during the disaster period of COVID are not automatic. Taxpayers must file formal claims with the IRS and demonstrate that the penalties or interest they were charged fell within the timeframe affected by the court’s interpretation of disaster relief laws. Providing supporting documentation and accurate filings will also play a major part in whether a claim to recover a refund is accepted.
There is also a time limit for pursuing these refunds, but deadlines vary depending on the specific circumstances of each case. In many cases, taxpayers must file a claim for a refund before applicable statutes of limitations expire. The earliest deadline is May 2026, and it extends from there depending on when the original payments were made. Acting promptly by contacting a reputable tax attorney near you allows taxpayers to preserve their right to recover funds.
How Paladini Law Assists Clients Who Were Charged Tax Penalties During COVID
Pursuing a refund based on the Kwong v. United States case ruling requires a clear understanding of both the legal framework and IRS procedures, which can be hard for individuals and business owners to do alone. For taxpayers asking, “can I get IRS penalties refunded from COVID,” working with an experienced tax attorney can make it easier to determine eligibility and properly file a claim. Our team at Paladini Law provides experienced tax representation for clients throughout the United States, with offices located in New Jersey and Yonkers, NY. Those who are seeking to recover pandemic-related penalties or resolve disputes with the IRS can trust our team to gather evidence, file a claim, and fight for their rights to compensation. Our firm works closely with clients to:
- Analyze tax records and identify potential refund opportunities
- Interpret how the Kwong decision applies to specific situations
- Prepare and submit refund claims accurately and efficiently
- Advocate on behalf of clients in communications with the IRS
- Address related tax issues, including audits, appeals, and penalty disputes
Each case we take on is approached with careful attention to detail, as our main goal is to help clients pursue the maximum recovery available under the law.
