New Tax Relief Opportunity May Be Available for COVID-Era IRS Penalties and Interest
A recent federal court decision, Kwong v. United States, may create an opportunity for certain taxpayers to seek refunds or relief related to IRS penalties and interest assessed during the COVID-19 pandemic period.
While the law in this area is still evolving, an important deadline is approaching. Taxpayers who may qualify should consider taking action before July 10, 2026, to help preserve potential claims for refund or abatement.
At Squire, we are actively monitoring these developments and helping clients evaluate whether this ruling may apply to their unique circumstances.
Why This Matters
During the COVID-19 declared emergency, the federal government postponed various tax filing and payment deadlines under disaster-relief provisions. The Kwong decision raises questions about whether certain penalties and interest tied to that period were properly assessed.
As a result, some taxpayers who either paid penalties and interest during the pandemic period or still have unpaid assessed amounts related to that timeframe may have opportunities to pursue relief.
This issue could potentially affect:
- Individuals
- Businesses
- Trusts and estates
Items Taxpayers Should Review
Potential relief may apply to:
- Failure-to-file penalties
- Failure-to-pay penalties
- Certain estimated tax penalties
- Related interest charges
Important Deadlines and Considerations
There may be a limited window to pursue refunds or request abatements related to COVID-era penalties and interest.
Key reminders:
- The IRS is not expected to issue refunds automatically
- Action may be required before July 10, 2026
- In some situations, deadlines could apply even earlier
- Protective refund claims may be necessary to preserve rights while the law continues to develop
How Squire Can Help
Our tax advisors can help evaluate whether this ruling may impact your situation and assist with:
- Reviewing penalty and interest assessments
- Determining eligibility for relief
- Filing protective claims
- Requesting refunds or abatements where appropriate
Planning ahead and acting early may help preserve available opportunities.
To learn more or discuss your situation, contact the Squire team today at (801)225-6900 or email us at squiretax@squire.com.