The Kwong Appeal: IRS Challenges Landmark Ruling on COVID-Era Tax Deadlines

The landscape of tax administration in the United States remains in a state of flux as the Internal Revenue Service (IRS) officially challenges a significant judicial interpretation of COVID-19-era relief provisions. The legal battle centers on Kwong v. United States (179 Fed. Cl. 382 (2025)), a case that has sparked widespread debate over whether the pandemic-related disaster declarations under Section 7508A(d) of the Internal Revenue Code automatically extended the statute of limitations for filing tax refund claims.

While the U.S. Court of Federal Claims originally ruled in favor of a broad interpretation—suggesting that filing deadlines for various tax actions were suspended through July 10, 2023—the IRS has now formally initiated an appeal to the U.S. Court of Appeals for the Federal Circuit. This development creates a precarious window for taxpayers who may have missed traditional deadlines for tax years 2019 through 2022, prompting the National Taxpayer Advocate to urge caution while simultaneously highlighting a potential, albeit uncertain, path to reclaiming refunds.

Chronology of the Legal Conflict

The roots of this litigation trace back to the onset of the COVID-19 pandemic and the subsequent legislative responses designed to mitigate the financial strain on the American public.

• January 20, 2020: The start of the period designated by the COVID-19 disaster declaration.
• The Enactment of Section 7508A(d): Congress passed this provision to grant the Treasury Secretary authority to postpone certain tax-related deadlines. The ambiguity lies in whether this authority was discretionary or an automatic trigger for all taxpayers during the disaster period.
• The Abdo Precedent (2024): In Abdo v. Commissioner, 162 T.C. 148, the Tax Court examined the scope of these suspensions. The IRS consistently argued a narrow interpretation, asserting that the provision did not grant a blanket extension but rather a conditional one requiring Treasury action.
• The Kwong Decision (2025): The Court of Federal Claims departed from the government’s restricted view, holding that the statutory language effectively suspended filing and payment deadlines across the board, potentially extending the standard three-year statute of limitations for many taxpayers through July 10, 2023.
• May 2026: The IRS filed a formal notice of appeal in the Federal Circuit. The agency is currently preparing its opening brief, which is expected to be submitted by July 20, 2026.

Understanding Section 7508A(d) and the Kwong Reasoning

At the heart of the dispute is the interpretation of Section 7508A(d)(1). The Court of Federal Claims reasoned that the period between January 20, 2020, and July 10, 2023, should be "disregarded" when calculating the timeline for tax filing obligations.

For the average taxpayer, the standard rule is that a claim for credit or refund of an overpayment of any tax must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later. The Kwong decision suggests that because the COVID-19 period was effectively "paused," the three-year clock did not run during that specific timeframe. If this interpretation holds, taxpayers who failed to file returns for 2019, 2020, 2021, or 2022 might find themselves with an unexpected extension of their refund window.

However, the IRS vehemently disagrees. In its filings regarding similar cases, the government has maintained that Section 7508A(d) serves as a grant of administrative discretion. According to the IRS, the provision does not function as a self-executing extension for all taxpayers, but rather allows the Treasury Secretary to identify specific deadlines for relief—a power they argue was exercised selectively rather than universally.

Implications for Taxpayers: A Complex Landscape

National Taxpayer Advocate Erin Collins has been instrumental in bringing the implications of Kwong to the public eye. In a recent blog post, she emphasized that while the ruling offers a glimmer of hope for those who missed refund opportunities, the law is far from settled.

The Potential for Refund Claims

The most direct implication is for taxpayers who did not file a return for the 2019–2022 period. Under normal circumstances, these taxpayers would be barred from claiming a refund once the three-year statute of limitations expires. Under the Kwong reasoning, however, these individuals might still have a viable claim.

Hypothetical Case: A taxpayer had significant income tax withheld from their wages in 2020 but failed to file a tax return. Ordinarily, the window to claim that refund would have closed. Under the Kwong logic, that window could remain open, potentially allowing the taxpayer to file a return and claim their refund even now.

Beyond Refunds: Credits and Stimulus

The scope of the Kwong decision may extend beyond simple tax refunds. It potentially affects eligibility for various refundable tax credits, such as the Earned Income Tax Credit (EITC), the Child Tax Credit, and certain stimulus-related benefits tied to tax filings. If the "disregarded" period is upheld by the appellate court, it could theoretically reopen the door for millions of dollars in unclaimed benefits.

The Advocate’s Warning: Proceed with Caution

Despite the potential for recovery, Erin Collins warns that relying on Kwong is not a risk-free strategy. Because the IRS is actively challenging the decision, a future appellate ruling could narrow or entirely overturn the Court of Federal Claims’ interpretation.

"Taxpayers should carefully evaluate their individual circumstances before filing claims based on the court’s reasoning," Collins advised. "Even though the law is still developing, many taxpayers may need to act on or before July 10, 2026, to protect potential refund rights while the courts continue deciding these issues."

Protective Claims: A Strategic Option

For those unsure whether they fall under the Kwong protection, the filing of a "protective claim" is an essential tool. A protective claim is a formal request for a refund filed with the IRS to preserve the taxpayer’s right to receive a refund if a future court decision or legislative change confirms their eligibility.

However, Collins clarified that filing such a claim is not a guarantee of payment. Any claim filed under the shadow of Kwong will likely be subject to heightened scrutiny by the IRS, and in many cases, the agency may choose to hold these claims in suspense until the Federal Circuit reaches a final verdict in the appeal.

Official IRS Stance and Future Outlook

The IRS has maintained a consistent, narrow interpretation of its disaster-relief powers. By appealing the Kwong decision, the agency is seeking to prevent a widespread reopening of past tax years, which would present a massive administrative challenge and significant budgetary implications for the federal government.

The legal community is now focused on the July 20, 2026, deadline for the IRS to file its opening brief. This document will be critical, as it will likely outline the government’s comprehensive legal theory on why the Court of Federal Claims erred in its interpretation. Legal analysts expect the brief to focus on the separation of powers and the extent of the Treasury Secretary’s discretionary authority under the Internal Revenue Code.

Recommendations for Taxpayers

Given the uncertainty, taxpayers should consider the following steps:

1. Assess Filing History: Identify if you have unfiled returns for the 2019–2022 tax years, particularly if you were owed a refund due to excessive withholding or refundable credits.
2. Consult a Professional: Because the law is "developing" and "unsettled," professional tax advice is crucial. A tax attorney or CPA can help determine if the specific facts of your case align with the Kwong decision.
3. Monitor the Litigation: The outcome in the Federal Circuit will be the deciding factor. Taxpayers should monitor updates regarding the Kwong appeal throughout the remainder of 2026.
4. Evaluate Deadlines: Even if the court rules in favor of taxpayers, the specific dates for relief may be limited. Protecting your rights by filing a claim before the potential July 10, 2026, date may be a necessary precaution for many.

As the Federal Circuit prepares to hear the case, the Kwong saga serves as a reminder of the complex interplay between emergency disaster declarations and established tax law. While the promise of a tax refund is enticing, the current legal reality demands a measured, strategic approach to ensure that taxpayers do not inadvertently waive their rights or trigger unnecessary audits. For now, the legal system remains the final arbiter, and until the Federal Circuit issues its opinion, the status of COVID-era refund claims remains a high-stakes question mark.