Articles

Client Alert: Kwong and the July 10 Deadline: Why Advisors Should Flag Protective Refund Claims This Week

Date: July 2, 2026
  • For most affected taxpayers, a protective claim on Form 843 must be filed by July 10, 2026 to preserve the right to a refund
  • The IRS has formally accepted only a narrow 60-day postponement, so claims relying on the full period should be filed protectively and may have to be litigated
  • Kwong v. United States treats federal tax deadlines that fell between January 20, 2020 and July 10, 2023 as postponed, opening a path to recover penalties and interest paid during the COVID-19 disaster period

A recent Court of Federal Claims decision may entitle clients to refunds of COVID-era federal penalties and interest, but for many, the window to preserve the claim closes July 10, 2026.

If you advise clients who paid federal failure-to-file penalties, failure-to-pay penalties or underpayment interest tied to a deadline that fell between January 20, 2020 and July 10, 2023, this is a week to act. A recent decision has opened a narrow, time-sensitive path to recover those amounts, and for many taxpayers, the deadline to preserve the claim is July 10, 2026.


What the court held

In Kwong v. United States, 179 Fed. Cl. 382 (2025), the U.S. Court of Federal Claims held that the 2019 version of IRC § 7508A(d) imposed a mandatory, automatic postponement of federal tax deadlines for the full COVID-19 disaster period, running from January 20, 2020 through July 10, 2023 (60 days after the May 11, 2023 close of the incident period). Applying Loper Bright Enterprises v. Raimondo, the court declined to defer to the contrary Treasury regulation and read the statute on its own terms. Kwong builds on the Tax Court's unanimous decision in Abdo v. Commissioner, 162 T.C. 148 (2024), which first held that the postponement is self-executing.


Why it matters for refunds

If deadlines that fell inside the disaster window are treated as postponed to July 10, 2023, then under the three-year limitations period of IRC § 6511, the refund-claim period for many affected years runs to July 10, 2026. Congress reinforced the theory in the Disaster Related Extension of Deadlines Act (P.L. 119-64, enacted December 26, 2025), which treats a disaster postponement as a filing extension for lookback purposes on claims filed after that date.


The government is not conceding

This is why posture matters more than optimism. In Action on Decision AOD-2026-01, the IRS acquiesced only to a narrow 60-day postponement, January 20 to March 20, 2020, and expressly declined to accept the broader reading that reaches July 10, 2023. The Service has said it will continue to defend its regulation, and the decision remains subject to appeal. In practical terms, claims that rely on the full disaster-period postponement should be expected to draw resistance and may have to be litigated to succeed. Waiting for appellate certainty is not a viable strategy: for many taxpayers, the limitations window will close before the courts finish.

That tension, a viable but unsettled theory running against a hard deadline, is exactly what a protective claim is built for.


Who to review now

Flag any client who, for a deadline falling between January 20, 2020 and July 10, 2023, paid failure-to-file or failure-to-pay penalties, underpayment or other assessed interest, or in some cases estimated-tax or information-return penalties.

The exposure is most meaningful for businesses, estates and higher-income individuals carrying sizable COVID-era assessments. Start with IRS account transcripts for tax years 2019 through 2023 and identify the penalty and interest entries and their payment dates.


The one action to take

File a protective claim on Form 843 before the applicable deadline. Four points separate a strong claim from a weak one:
  • Run the limitations math per client. July 10, 2026 is a planning benchmark, not a universal date. The two-year-from-payment rule under § 6511 can control, and the amount recoverable is capped by the lookback period; confirm each year rather than assuming.
  • Disclose the legal basis specifically. Cite Kwong, Abdo and P.L. 119-64. Two courts support the position, which supplies a reasonable basis; adequate disclosure also guards against a § 6676 erroneous-claim penalty in light of the IRS's nonacquiescence.
  • Ground the theory correctly. The argument rests on the statutory postponement under § 7508A(d), not equitable tolling, which a district court rejected in Hamilton v. United States (N.D. Cal. 2025).
  • Preserve proof of timely filing (certified mail, return receipt).


How we can help

Whiteford's tax controversy team, led by Michael March, can review transcripts, run the limitations analysis and prepare protective claims, both for clients directly and for advisors who would rather hand off the IRS side while they manage the underlying tax data. If you have a client who may be affected, the binding constraint is the calendar. The sooner transcripts are in hand, the better. Reach out and we will help you assess whether a claim is worth filing before July 10, 2026.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.