Court Ruling Could Mean a Refund—but Time Is Running Out

A recent court decision (Kwong v. United States) could result in significant refunds of penalties and interest paid by taxpayers during the COVID-19 era.

According to the Kwong decision, penalties and interest for failing to file and pay taxes were suspended from Jan. 20, 2020, through July 10, 2023. The period covers the COVID-19 federally declared disaster, plus 60 days.

Who does this apply to? Individuals, partnerships, corporations, nonprofits, estates, and trusts may qualify. The issue could apply not only to income taxes but also to employment, gift, estate, and excise taxes assessed during this period.

What action needs to be taken? You cannot wait for the IRS to issue a refund automatically. To claim one, you must file Form 843, “Claim for Refund and Request for Abatement.” The three-year statute of limitations expires on July 10, so taxpayers must file before then.

Be aware of a few hurdles. Form 843 cannot be filed electronically; a hard copy must be mailed. With the deadline looming, it is wise to keep proof of mailing.

Also, don’t expect a quick refund. The IRS has appealed the court’s decision, and it may take years for the issue to be resolved. When filing Form 843, it is advisable to write across the top: “Protective Refund Claim Pursuant to Kwong Case.”