Federal courts recently ruled, in a case called “Kwong v. United States”, that the IRS wrongly charged a lot of us penalties and interest on our tax returns between 2020 and 2023 — and now we may be able to get that money back.
Because of the COVID-19 crisis, there was a “federal disaster declaration” in place from January 20 of 2020 through July 10 of 2023. The Internal Revenue Code is pretty explicit that while there’s an ongoing disaster of this sort, the IRS shouldn’t be charging us penalties and interest on late filings or payments.
The “National Taxpayer Advocate” blog, available on the official IRS.gov website, says:
[Y]ou may be entitled to a refund or abatement of certain amounts assessed during the COVID period, including:
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- Penalties assessed for failure to timely file returns, failure to pay taxes, or failure to make estimated tax payments;
- Interest that began accruing earlier than it should have, or not at all; and
- Overpayment interest for the 2020–2023 disaster period.
It’s probable that “tens of millions” of taxpayers have paid this sort of penalties and interest during the three and a half years that the disaster declaration was in force. You can check your returns from the years in question, or request a “tax account transcript” from the IRS, to see whether you are among those impacted.
Now, the case is almost certain to be appealed, so there’s no official final ruling yet — but there is a looming deadline. Those of us who are impacted have until July 10th, 2026, to file “Form 843” with the IRS. If you have a tax advisor, they should be able to help get that done — if you’re doing it yourself, there are a couple of key things you should make sure to do. First, you should write something like “Protective Refund Claim Pursuant to Kwong Case” across the top of the form, so that the IRS knows that you’re trying to make sure that your claim is ready if the decision is upheld. And second, since there’s currently no electronic way to submit the form, and the IRS doesn’t have a way to acknowledge its receipt, you should probably send the form via Certified Mail. And, of course, make sure to keep a copy of the forms you submit … just in case.
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The above is provided for informational purposes only, and is based on sources believed to be reliable. Horizons Sustainable Financial Services is not a tax advisor, and this information does not constitute and should not be construed as tax advice. Please consult your tax advisor for more information about your particular situation.
