The U.S. Court of Federal Claims just threw out COVID-era tax deadlines. Could you gain relief?
- Federal tax deadlines during the COVID-19 disaster period may have been extended until July 10, 2026, due to a recent ruling by the U.S. Court of Federal Claims.
- Taxpayers may now qualify for a refund or abatement on penalties or interest paid related to tax filings during the COVID-19 disaster period.
- Talk to your tax advisor to protect your rights to penalty relief well in advance of the July 10 deadline.
The U.S. Court of Federal Claims recently issued Kwong v. United States, in which it held that the entire federally declared COVID-19 disaster period must be disregarded when computing certain federal tax deadlines. This created a 39-month pause on deadlines.
However, Kwong quietly does more than expand COVID-era penalty relief — it reopens procedural doors the IRS believed were already closed.
While most commentary has focused on the Court of Federal Claims’ holding that the entire COVID-19 disaster period must be disregarded under IRC §7508A(d), the more consequential takeaway is procedural: taxpayers may still be able to pursue refunds or abatements even where the IRS previously assessed penalties, issued disallowance notices or allowed statutes to run under pre-pandemic assumptions.
With the statute of limitations for many claims expiring in mid-2026, practitioners should reassess penalty and interest exposure through a procedural lens — not simply whether relief exists, but whether claims previously thought untimely may now be preserved or revived.
Keep reading to learn more.
What is IRC §7508A(d)?
Prior to 2019, disaster-related penalty relief was largely discretionary and administered through IRS notices. That changed in December 2019 when Congress enacted IRC §7508A(d). This provision mandates that a federally declared disaster period be disregarded when computing deadlines for a wide range of tax-related acts, including:
- Filing tax returns
- Paying taxes
- Filing petitions with the U.S. Tax Court
- Filing refund claims
- Bringing suit
- Determining the amount of interest, penalties, additions to tax and additional amounts
- Determining the amount of any credit or refund
How does §7508A(d) relate to the COVID-19 pandemic?
Despite the clear statutory directive under §7508A(d), the IRS responded to the COVID‑19 pandemic with a series of administrative notices that provided only limited and intermittent deadline extensions. In Kwong, the Court of Federal Claims rejected this piecemeal approach, holding that the plain language of the statute controls, even if Congress did not anticipate a disaster declaration lasting more than three years.
As the court explained, although the length of the COVID‑19 disaster period may have been unforeseen, §7508A(d) nevertheless applies as written.
What is the new deadline to file a tax refund claim?
Under IRC §6511(a), a claim for refund generally must be filed within the later of:
- Three years from the date the return was filed, or
- Two years from the date the tax was paid
The 2019 version of IRC §7508A(d) provided a mandatory 60-day postponement period following the end of a federally declared disaster, extending the deadline further.
The COVID‑19 disaster timeline puts the new deadline at July 10, 2026
President Trump declared the COVID-19 pandemic a major disaster on March 13, 2020. That declaration remained in effect until May 11, 2023, when FEMA formally ended the emergency period. Applying the additional 60-day postponement under the then-applicable version of the statute, the disaster relief period ran through July 10, 2023.
As a result, taxpayers generally have three years from July 10, 2023 — or until July 10, 2026 — to file protective refund claims related to penalties and interest paid or incurred during the federally declared COVID‑19 disaster period.
Could you qualify for a refund claim under IRC §7508A(d)?
Consider a taxpayer whose 2020 individual income tax return was due on April 15, 2021. Under normal rules, late filing and late payment penalties would begin accruing immediately after that date.
Under the Kwong decision, however, the COVID-19 disaster period is disregarded when computing those deadlines. As a practical matter, penalties associated with that return would not be applicable until July 10, 2023.
- If the taxpayer has already paid penalties or interest related to that period, a refund claim should be evaluated.
- If the penalties have been assessed but not paid, a request for abatement should be considered.
Does this COVID tax relief apply to state taxes?
State tax treatment does not always conform to federal disaster relief rules. While some states enacted their own extensions — for example, New York extended the April 15, 2020, deadline to July 15, 2020 — the scope and duration of relief vary widely by jurisdiction.
Taxpayers should review applicable state disaster provisions, monitor conformity developments and consider filing state-level protective claims where appropriate.
Next steps for taxpayers
The Kwong decision may create a meaningful opportunity for taxpayers who incurred penalties or interest during the COVID‑19 period. With the statute of limitations for many claims expiring on July 10, 2026, taxpayers should promptly:
- Identify penalties and interest assessed or paid during the federally declared disaster window.
- Evaluate eligibility for refund or abatement
- Consider filing Form 843, Claim for Refund and Request for Abatement, for each affected tax period.
Although the IRS is expected to challenge or limit the impact of the decision, Congress’s 2019 statutory mandate — now reinforced by Kwong — provides a strong legal foundation for relief. Given the procedural complexity and unresolved administrative questions, taxpayers should consult experienced tax professionals before filing claims.
The window to act is closing. Taxpayers who fail to preserve their rights before the statute of limitations expires risk permanently forfeiting potentially significant refunds.
- The IRS is not expected to issue refunds automatically.
- This is a protective refund claim or request for abatement.
- Filing it preserves your right to a later refund or abatement; if you do not act by July 10, you may never be able to claim this refund or abatement.
How Wipfli can help
We help businesses, organizations and individuals to strengthen their tax position, claim incentives and gain available relief. If you could be impacted by the Kwong decision or want to reassess your tax strategy, let’s talk. Start a conversation.
