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DOES KWONG = TAX REFUND?



Millions of taxpayers INCLUDING businesses may be eligible for refunds of IRS penalties and interest assessed during COVID.

Could the Kwong case generate a tax refund for you OR your business? The answer is likely “yes,” so if you are a taxpayer, take note! If you AND/OR a business you own (other than Single-Member LLCs or sole proprietorship) paid IRS penalties or interest between January 20, 2020, and July 10, 2023, recent developments in Kwong v. United States may affect your ability to recover some or all of those amounts.


Most taxpayers have never heard of the Kwong case, which is fine by the IRS, who would certainly prefer not to allocate additional resources it doesn’t have toward refunding amounts they believe should not be. They have set a deadline for July 10, 2026 to MAIL form 843 - claim for refund and request for abatement. 

Let's quickly review the Kwong case, who may be affected, and what steps are necessary to protect your refund rights.


What is the Kwong Case?


The Kwong case challenges the IRS’s assessment of certain income tax penalties and interest INCLUDING estimated taxes during the COVID-19 federally declared disaster period.


  • During federally declared disasters, the IRS is required to act by postponing certain tax filing requirements and delaying the assessment of applicable penalties and interest until after the disaster period has ended.

  • COVID-19 was designated as a federally declared disaster. The ongoing litigation argues that penalties and interest assessed throughout that disaster period were improperly imposed.

  • If the courts rule in favor of the taxpayers, eligible taxpayers will be entitled to refunds of penalties and interest already paid, or abatements of penalties and interest that remain unpaid.


Who is Impacted?


You may be impacted if:

  • Penalties and/or interest were assessed from tax year 2020 through 2022 [AND]

  • You paid IRS penalties and/or interest related to your income taxes, including estimated taxes for tax years 2020 through Q2 2023 [OR]

  • You currently owe penalties or interest that were assessed during that period.

As with any litigated tax matters, eligibility ultimately depends on the outcome of the litigation and each taxpayer's unique facts and circumstances.

Important Deadline: July 10, 2026

Eligible taxpayers and businesses who wish to preserve potential refund rights NEED to take action by July 10, 2026. If you are not sure whether you or your business qualifies, you can simply file a protective claim for each tax year impacted WITHOUT including a dollar amount to reserve your right to claim a refund for that tax year in the future. You must file a separate 843 form for each tax year.  The applicable guidance from the IRS’s Internal Revenue Manual (IRM) 25.6.1.10.3.2.5(2) which states: “A valid protective claim need not state a particular dollar amount or demand an immediate refund [on the 843 form]; however, the claim must identify and describe the contingencies affecting the claim [reference the Kwong Case]; must be sufficiently clear and definite to alert the IRS as to the essential nature of the claim [write  ‘Protective Refund (or Abatement) Claim’]; and must correctly identify the taxpayer and the specific year for which a refund is sought.” 


What Should I Do Now?


If you believe you and/or your eligible business have paid IRS penalties or interest during the COVID disaster relief period, take the following steps before July 10, 2026:


Step 1: Determine the Year(s) that You or the Business was Impacted


  • Review your account transcript or payment records for years 2020 - Q2 2023 (Step 2)

  • If penalties and interest are charged, you are eligible for refunds of those amounts. If amounts are unknown, proceed to Step 2 or 4.


Step 2: Obtain the applicable IRS Account Transcripts for each year (if able)


  • Log into your IRS online account at IRS.gov.

  • Download account transcripts for each potentially affected tax year.

  • Review transcripts to identify penalties and interest assessed and paid.

If you do not already have an IRS online account, transcripts may also be requested directly from the IRS:  https://www.irs.gov/individuals/get-transcript

Step 3: Calculate the Amount Involved (if able)


  • Determine the total penalties and interest assessed for each applicable tax year.

  • Verify amounts against IRS transcripts and any notices you received.

  • Keep copies of all supporting documentation.

Step 4: Complete Form 843 for each applicable year to the extent possible 


  • Prepare a separate Form 843 for each tax year involved. At a MINIMUM include:

    • The taxpayer or business’s contact information, EIN/SSN, etc.

    • The tax year

    • And add the proper verbiage to the top of each form (see below)


  • For any 843 forms you can fully and accurately complete including the requested amount of refund or abatement, write: "Refund Claim Pursuant to Kwong Case" at the top of the form.

  • If you cannot complete form 843 for an applicable tax year, and wish to simply preserve your rights while litigation remains pending, write: "PROTECTIVE Refund Claim Pursuant to Kwong Case" at the top of each year’s form.

  • If you have not yet paid penalties and interest for an eligible tax year, write the word ‘Abatement’ instead of ‘Refund’ at the top of each year’s form.

Step 5: Mail Your Forms by JULY 10th, 2026!


  • Sign and date each Form 843 after completing it as much as possible.

  • Make copies for your records.

  • Mail each form via certified mail with return receipt requested BY JULY 10th to:

Internal Revenue ServiceOgden, UT 84201

Additional Resources

The following articles published by the National Taxpayer Advocate provide additional background and guidance:

I encourage you to review these articles in order to better understand the litigation and the steps required to preserve potential refund rights.

Final Check

  • Verify that the penalties fall within the affected time period.

  • Review any IRS notices and correspondence issued for tax years 2020 - Q2 2023

  • If applicable, confirm that amounts reported on Form 843 match your IRS transcripts.

  • Retain copies of all forms, transcripts, notices, and mailing receipts.

  • Consider consulting a qualified tax professional if you are uncertain how to proceed.


Disclaimer

This article is provided for informational purposes only and does not constitute financial or legal advice. Every taxpayer's facts and circumstances are unique, and the information discussed herein may not apply to all situations. The information above should not be interpreted as a recommendation that every taxpayer file a claim. Eligibility depends upon each taxpayer's specific facts and circumstances, and the outcome of the pending litigation remains uncertain.

Current clients of Shields Financial Services (SFS) who need assistance reviewing transcripts or preparing Form 843 may contact me for guidance. SFS does not warrant or guarantee services provided will result in a desirable outcome nor does SFS guarantee or warrant that any form 843 filings will be completed timely or that SFS will be immediately or readily available to address questions or concerns.  Clients are subject to all terms and conditions stated within their signed service agreements. Consultation availability is currently limited to existing clients with an active signed service agreement in place.  No service will be performed by SFS without a signed service agreement in place. If you would like to begin working with me, you can fill out a contact form here get started.

 
 
 

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