Article | by Craig Freeman, CPA

As shared in our previous blog post, a recent federal tax development may affect your rights with respect to certain IRS penalties and interest assessed during the COVID-19 national emergency period. Depending on your circumstances, you may wish to consider whether a protective refund claim should be filed to preserve any potential entitlement to relief.

Because the applicable filing deadline is July 10, 2026, we ask that you contact us no later than June 17, 2026, if you would like us to evaluate whether this issue may apply to you.

Background: The Kwong v. United States Decision

A recent decision of the U.S. Court of Federal Claims, Kwong v. United States, has raised the possibility that certain IRS penalties and interest assessed or accrued during the COVID-19 national emergency period—generally January 20, 2020, through July 10, 2023—may not have been properly imposed under federal law.

If the Kwong decision is ultimately upheld on appeal, taxpayers who were assessed or who paid qualifying penalties and interest during that period may be entitled to refunds or abatements.

It is important to note, however, that the government has appealed the decision, and the law in this area remains unsettled. We are not advising that any refund is assured or that relief is likely in every case. Rather, the purpose of this email is to alert you to a potential issue and the possible need to file a protective claim before the applicable deadline to preserve your rights.

Does This Potentially Apply to You?

You may wish to consider a review of your federal tax account if, during the period from January 20, 2020, through July 10, 2023, any of the following occurred:

• You were assessed a late-filing or late-payment penalty because a return or payment was submitted after its due date.
• You were assessed a failure-to-deposit penalty, including in connection with payroll tax deposits.
• You were assessed an estimated tax underpayment penalty.
• You were charged interest on unpaid taxes or on assessed penalties.
• You received an IRS notice, including a CP-series notice or statutory notice of deficiency, referencing penalties or interest for the period described above. 
• You had an open IRS examination, appeal, collection matter, or penalty abatement request involving penalties or interest during this period, even if the matter was resolved later.

A “yes” answer to any of the above does not mean that you are automatically entitled to a refund or abatement. It does indicate, however, that your account may warrant further review. If you are uncertain whether any of these circumstances apply, we would be pleased to discuss them with you.

What a Protective Claim Is and Why It Matters

A protective refund claim is a filing made with the IRS to preserve a taxpayer’s right to claim a refund if the law is later clarified or ultimately resolved in the taxpayer’s favor. Filing such a claim does not require immediate litigation or the assertion of an aggressive position; rather, it is intended to preserve your ability to seek relief while the legal issue remains unresolved.

If a protective claim is not filed before the applicable limitations period expires, the right to seek a refund may be permanently lost, even if the courts later rule in favor of taxpayers. Based on current information, the relevant deadline is July 10, 2026, which is three years from the end of the COVID-19 national emergency period.

What We Would Need From You

To evaluate whether a protective claim may be appropriate, we would need to obtain and review relevant IRS account transcripts, analyze the penalties and interest at issue, and assess whether a claim would be viable under your particular facts. This process can take time, and obtaining transcripts alone may require up to a couple weeks.

Accordingly, if you would like us to consider this matter, please contact our office no later than June 17, 2026. If we do not hear from you by that date, we will assume that you do not wish to pursue a review, and no action will be taken on your behalf.

Important Disclaimer

This information is provided for informational purposes only and does not constitute tax advice specific to your circumstances. As noted above, the law in this area is unsettled and may change as the litigation develops.

If you have any questions regarding whether this issue may affect you, please feel free to contact us at info@gmco.com.