The Tax Court’s recent decision in Bowen v. Commissioner provides new guidance on the scope of potential Covid-era refund claims arising from Kwong v. United States. To understand the ramifications of Bowen for taxpayers who are potentially eligible for refunds under Kwong, it is helpful to begin with what the Kwong case established.
The Kwong case arose from the IRS’s use of Internal Revenue Code §7508A, a provision that allows the government to postpone certain tax filing and payment deadlines when taxpayers are affected by a federally declared disaster. During the COVID-19 pandemic, the IRS used §7508A to postpone numerous tax deadlines for taxpayers affected by the disaster.
The taxpayer argued that when the government postponed tax deadlines under §7508A, certain penalties and interest should not have been imposed during the period covered by the postponement. The court agreed, providing a basis for taxpayers to pursue refunds of certain penalties and interest paid during the COVID disaster period. Its potential impact is significant because the court’s ruling arguably did not limit its applicability to any one type of tax or penalty.
Against that backdrop comes Bowen v. Commissioner. The Tax Court’s decision provides an important clarification of how broadly §7508A — and the reasoning underlying the Kwong litigation — can be applied. The court held that the COVID-era relief extends to penalties tied to postponed filing or payment deadlines, but does not extend in the same manner to accuracy-related penalties.
That distinction is significant.
Failure-to-file and failure-to-pay penalties are directly connected to a taxpayer’s failure to satisfy a particular deadline. When the government postpones that deadline under §7508A, there is a direct connection between the postponement and the resulting penalty.
Accuracy-related penalties are different. They arise from the substance of a taxpayer’s return — for example, an understatement of tax or another reporting error — rather than simply from the failure to file or pay by a particular date.
The Bowen court therefore concluded that accuracy-related penalties do not receive the same protection merely because they were assessed during the COVID disaster period.
In that respect, Bowen narrows the scope of the potential relief. But it is important not to overread the decision.
The court did not hold that COVID-era refund claims generally are unavailable. Rather, it drew a line around a particular category of penalties.
For taxpayers who paid COVID-era penalties and interest, the practical question is therefore not simply whether they were assessed during the pandemic. The critical questions include what type of penalty was assessed, when the underlying tax was paid and whether the liability arose from a postponed filing or payment deadline.
Depending on the facts and the applicable limitations period, taxpayers may still have potential claims if they paid: Failure-to-file penalties
Taxpayers whose claims involve accuracy-related penalties, however, face a substantially more difficult path following Bowen.
Thus, while Bowen narrows the potential universe of claims, it does not close the door opened by the Kwong litigation.
You may have heard that July 10, 2026, was a significant deadline for pursuing certain COVID-related refund claims. While that date is important, it was not a universal deadline that automatically bars every taxpayer from pursuing a refund.
Applicable limitations periods can vary depending on factors such as when the tax, penalty or interest was paid, when a refund claim was filed and the IRS’s response. Accordingly, some taxpayers may still have time to pursue or preserve a claim.
Because these deadlines are fact-specific and can be unforgiving, taxpayers who believe they may have a COVID-related refund claim should consult their tax adviser or counsel. Prompt action may be necessary to preserve potential claims.
A key takeaway from Bowen is that the potential relief recognized in the Kwong litigation is narrower than some taxpayers may have believed, but it remains potentially significant.
Bowen draws a line at accuracy-related penalties. It does not, however, eliminate the potential relief associated with penalties arising from postponed filing and payment deadlines.
Moreover, taxpayers who paid significant penalties or interest during the COVID disaster period should not assume that their opportunity for relief has ended — particularly simply because they have heard that the July 10, 2026, deadline has passed.
The applicable deadline depends on the particular taxpayer’s circumstances, including when the underlying tax was paid.
A taxpayer who believes they may have a potential claim arising from the Kwong litigation should reach out to a qualified tax professional to determine whether a claim remains timely and viable.
For more information on this topic, please contact a member of our team.
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