Recent federal court decisions in Kwong v. United States1 and Abdo v. Commissioner2 expand the potential relief to taxpayers from penalties and interest assessed and/or paid during the COVID-19 federally declared disaster. Affected taxpayers should consider filing a protective refund claim on or before July 10, 2026, to request a refund of amounts paid or relief from amounts assessed during the period from January 20, 2020, to July 10, 2023.
Section 7508A(d): Taxpayer Relief During the COVID-19 Disaster
In 2019, prior to the COVID-19 pandemic, Congress updated Internal Revenue Code (IRC) Section 7508A(d) to automatically extend the federal tax deadline for filing returns, paying taxes and other actions until 60 days after the end of a federally declared disaster. At the time the law was passed, no one expected a federally declared disaster period to last for more than three years.
Pursuant to declarations first by President Trump and then President Biden, the COVID-19 disaster ran from January 20, 2020, through May 11, 2023. Section 7508A(d) then applied to add 60 days to the end of the pandemic disaster period, granting additional time for tax filings, payments, etc., until July 10, 2023. According to Section 7508A(d), the period during the federally declared disaster and the 60-day extension are disregarded in determining whether specified acts were timely performed3.
Per the thorough discussion of Section 7508A(d) in the Federal Court of Claims ruling in Kwong, Section 7508A(d) effectively moved the due date or deadline for common federal tax activities that otherwise occurred during the disaster period, plus the 60-day extension, to July 10, 2023.
IRC Section 7508(a)(1) lists the common taxpayer acts that are permitted an extension of time under Section 7508A(d), including:
- Filing any return of income, estate, gift, employment or excise tax
- Payment of any income, estate, gift, employment or excise tax, or any installments thereof
- Filing a petition with the Tax Court or filing a notice of appeal from a decision of the Tax Court
- Allowance of a credit or refund of any tax
- Filing a claim for credit or refund of any tax
- Bringing suit upon any such claim for credit or refund
Kwong and Abdo Cases: Courts Address the Extent of Taxpayer Relief Under Section 7508A(d)
Both Kwong and Abdo addressed the application of Section 7508A(d) to extend time for taxpayers to execute specific acts that occurred during the pandemic disaster period.
In Kwong, the taxpayer filed suit in the U.S. Court of Federal Claims seeking a refund of penalties paid related to various tax years. The taxpayer’s initial claims for refund of penalties and interest were filed with the IRS. The IRS denied these claims in September and October 2020. The taxpayer then filed suit for refund in the U.S. Court of Federal Claims in March 2023.
Under the general rule of Section 6532, the suit would have been filed late (more than two years from the time the IRS disallowed the refund claim). However, the court determined that Section 7508A(d) extended the time for the taxpayer to file a refund suit under Section 6532 until July 10, 2023. The court granted relief to the taxpayer, saying, “The applicable emergency relief statute provides a postponement of deadlines that fall within the timing of the disaster, and that period did not expire until after Mr. Kwong filed suit in this court.”
In Abdo, a similar case in the U.S. Tax Court, taxpayers asserted that their petition was timely filed with the court because Section 7508A(d) extended the time they had to file a claim during the COVID-19 federally declared disaster period. The court ruled favorably for the taxpayers, stating “[IRC Section] 7508A(d) provides for an unambiguously self-executing postponement period for the filing of a petition with the court for a redetermination of a deficiency.”
In both cases, the courts said that these actions by the taxpayers were timely given the operation of Section 7508A(d) to disregard the period during the pandemic disaster and the sixty days thereafter.
IRS Pandemic Penalty Refund Response
It is important to note that the Abdo case is settled and not subject to appeal. However, the IRS issued an action on decision (AOD 2026-1, effective Jun 1, 2026), which declares the IRS’s position on this case. The IRS agrees with the result in the case for the taxpayer, but disagrees with the Tax Court’s reasoning and disregard of Treasury Regulations interpreting Section 7508A(d).
With respect to the Kwong case, on May 15, 2026, the government filed a notice of intent to appeal the decision of the Court of Federal Claims. The Court of Appeals for the Federal Circuit will address the government’s appeal of Kwong. There are other cases under consideration in the courts that address other tax actions occurring during the pandemic disaster period. The IRS and Department of Justice are addressing these cases.
Taxpayer Opportunity To Request Refunds
These two cases apply Section 7508A(d) to actions related to filing petitions in court. However, as noted above, this disaster extension may apply to more activities, including filing returns, paying taxes, requesting refunds, claiming credits and assessments of penalties and interest.
The decisions in Kwong and Abdo provide an opportunity for taxpayers to file protective refund claims for interest and penalties assessed and paid during the pandemic disaster period. The general rule for filing refund claims under Section 6511 is three years from filing the return or two years from payment of tax. Penalties and interest are considered a tax for this purpose. Because it appears former Section 7508A(d) suspended the tax payment and filing deadlines that occurred during the COVID-19 disaster period until July 10, 2023, the time for filing a refund claim may begin as of July 10, 2023, even if the return filing, tax payment, interest and penalty assessments occurred before that date. The expiration of this opportunity for protective refund claims is three years later, July 10, 2026.
Taxpayers who paid underpayment interest, failure to file or failure to pay penalties attributable to the COVID-19 disaster period may be entitled to a refund of those amounts. Taxpayers who were assessed interest and penalties during this same period, but have not paid these amounts, may ask for abatement.
A protective refund claim, generally filed with Form 843, preserves a taxpayer’s rights while IRS guidance, appealed cases, current lower court cases or other events are pending. This is an unsettled area, and there is no guarantee that a refund will be issued to taxpayers filing protective claims. Also, it is not certain when matters may be resolved, and if resolved favorably for taxpayers, when the refunds and abatements of interest and penalties may be issued.
Next Steps for COVID Tax Refunds
- Review tax returns and notices for assessed penalties and interest between January 20, 2020, and July 10, 2023
- File a protective refund claim for interest and penalties paid for the period
- Request abatement of penalties and interest for the period that are not yet paid
- File the protective refund claim and request abatement before July 10, 2026
- Monitor IRS announcements, guidance and additional litigation around this opportunity
- Respond promptly to IRS notices or requests for information regarding the refund claim
Your Guide Forward
Taxpayers should work with their tax advisors to assess eligibility and take timely action to preserve potential refund and abatement opportunities. Your Cherry Bekaert tax advisor is here to assist.
References
1Kwong v. U.S., 136 AFTR 2d 2025-6609 (Nov. 25, 2025)
2Mohamed K. Abdo, et ux. v. Commissioner, 162 TC 148 (2024)
3Section 7508A was subsequently amended to apply the 60-day extension period to the start date for a federally declared disaster rather than the end date.
