The appeal many expected has arrived, but the real question is what comes next.
For months, taxpayers and practitioners have wondered whether the IRS would ultimately accept the implications of Kwong v. United States or continue defending its interpretation of the COVID-era relief provisions under IRC §7508A(d). We now have part of that answer.
The government has filed a Notice of Appeal in Kwong, signaling that the IRS intends to continue litigating the issue rather than allowing the Court of Federal Claims’ decision to stand without challenge.
While there is still much we do not know, such as the precise legal arguments the IRS will make when it files its appellate brief, or how aggressively it will seek to defend its interpretation of §7508A(d), what we do know is this: the controversy continues. And taxpayers who have claims should not assume time is on their side.
The Kwong decision may prove to be one of the most consequential rulings affecting COVID-era tax administration.
The Court of Federal Claims held that IRC §7508A(d), as applicable during the COVID-19 pandemic, requires a mandatory suspension of certain tax-related deadlines from January 20, 2020, through July 10, 2023. Importantly, the court rejected the government’s position that relief was limited to one year or confined only to deadlines expressly identified in IRS notices.
If upheld, the implications are significant.
The decision potentially affects:
In practical terms, Kwong, together with related developments such as Abdo v. United States, creates potential opportunities for taxpayers who incurred interest and penalties during the pandemic period.
The potential reach is broad and includes:
Likewise, the refund opportunity applies to taxpayers who incurred:
Every case is fact-specific, but the population potentially impacted is much larger than many initially assumed.
Filing the appeal does not indicate that the IRS will refuse to concede the court’s decision in Kwong, nor does it necessarily mean the government intends to litigate the issue through every possible stage of appeal. At the same time, taxpayers should not assume the matter will be resolved quickly or wait for a final appellate outcome before evaluating their circumstances.
At a minimum, taxpayers who believe they may be affected should review bank statements, IRS notices, tax records and payment histories for COVID-period penalties, interest assessments or taxes paid that may fall within the relevant Kwong period in order to determine whether they have a plausible claim for refund or abatement.
The first step is simply determining whether an opportunity exists.
Taxpayers who delay evaluating potential claims may find that the procedural deadline has expired for seeking relief before the courts fully resolve the issue.
The IRS’s appeal in Kwong means the legal dispute surrounding COVID-era interest and penalty relief is continuing.
If you incurred IRS interest, penalties, or other potentially affected liabilities during the COVID period – or if you have questions regarding whether you qualify for relief – consider reaching out to a Withum tax professional to evaluate your specific facts and potential options. The deadline to file a refund claim is July 10, 2026, so now is the time to act.
For more information on this topic, please contact a member of our team.
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