A Recent Court Ruling May Create Refund Opportunities for COVID-Era IRS Penalties

A recent federal court decision has raised questions about IRS penalties and interest charges assessed during the COVID-19 pandemic. As a result, some taxpayers who paid certain IRS penalties or related interest associated with COVID-era postponed filing and payment deadlines may be eligible to pursue refund claims.

The case, Kwong v. United States, is still ongoing and could eventually be overturned. However, taxpayers who may qualify should be aware that there is a limited window to preserve potential refund rights. The IRS does not currently agree with the taxpayer position advanced in the litigation, and refund claims may ultimately be denied depending on future court decisions.

Taxpayers considering protective refund claims should be aware of potential filing deadlines, including a possible July 10, 2026 deadline depending on their circumstances.

Taxpayers who paid significant IRS penalties or interest during this period may want to review their situation and determine whether filing a protective refund claim makes sense.

How LMC Can Help

LMC can assist with evaluating eligibility, reviewing prior IRS payments, and determining whether steps should be taken before the filing deadline. If you believe this may apply to you, please contact your LMC advisor for guidance.