Only 3 Weeks Left to Protect Your Clients' Rights Under Kwong
The July 10, 2026 deadline is rapidly approaching.
If you have clients who incurred IRS penalties or related interest during the COVID-19 disaster relief period, now is the time to act. Filing a protective claim preserves your clients' rights while the legal and administrative implications of Kwong v. United States continue to develop.
What Are Kwong and Abdo, and Why Should Tax Professionals Care?
During the COVID-19 pandemic, the IRS exercised its authority under IRC §7508A to postpone numerous federal tax deadlines. Beginning January 20, 2020, and continuing through July 10, 2023, taxpayers received unprecedented filing and payment relief through a series of IRS notices and disaster declarations.
Historically, when deadlines are postponed under IRC §7508A, taxpayers who perform the required act within the postponement period are generally treated as having acted timely. As a result, questions arose regarding whether certain penalties and related interest assessed during the COVID relief period were properly imposed.
In Abdo v. Commissioner, the United States Tax Court considered the application of IRC §7508A during the COVID disaster period. The court concluded that the COVID disaster declarations triggered a mandatory postponement period under the statute. Following that decision, the IRS issued Action on Decision (AOD) 2026-01 , agreeing only that a 60-day postponement period existed from January 20, 2020, through March 20, 2020, while expressly rejecting broader interpretations of IRC §7508A.
The discussion expanded further with Kwong v. United States, 179 Fed. Cl. 382 (2025). In Kwong, the Court of Federal Claims held that certain Failure-to-File penalties were improperly assessed against taxpayers who filed during the COVID disaster relief period. The court concluded that the postponement provisions of IRC §7508A applied more broadly than the IRS had interpreted, potentially entitling affected taxpayers to refunds of penalties and related interest.
The IRS has not acquiesced to the broader interpretation adopted by the Kwong court, and the Department of Justice has appealed the decision to the United States Court of Appeals for the Federal Circuit. As a result, the ultimate scope of taxpayer relief remains unresolved.
Because litigation and administrative guidance continue to evolve, many tax professionals are filing protective claims for refund and abatement on behalf of affected taxpayers. A protective claim does not guarantee a refund. Rather, it preserves the taxpayer's right to seek a refund or abatement if future court decisions, IRS guidance, or legislative action ultimately confirm broader relief under IRC §7508A.
With the July 10, 2026 deadline approaching, filing a protective claim may be the most prudent way to protect a taxpayer's rights while these issues continue to develop.
Which Clients Should Be Considered?
You may wish to review clients who:
- Incurred Failure-to-File penalties during the COVID relief period
- Incurred Failure-to-Pay penalties during the COVID relief period
- Incurred Failure to make Estimated Payments penalties during the COVID relief period
- Paid significant interest associated with those penalties.
- Filed returns during the COVID postponement period.
- Have already paid penalties and interest related to those assessments.
How to Prepare Form 843
Step 1 – Complete Form 843
- Enter taxpayer information.
- Under Reason for Filing check “Other” and enter “Abatement or Refund of penalties & interest under Kwong v. United States, 179 Fed. Cl. 382”
- Identify the affected tax period.
- Enter the amount of penalties and/or interest being claimed.
- In the Explanation section, Sample Form 843 (Protective Claim) indicate that the claim is being submitted as a protective claim pursuant to IRC §7508A and the holding in Kwong v. United States.
Step 2 – Attach a Cover Letter
Attach a separate statement explaining:
- The claim is protective in nature.
- The taxpayer seeks refund and/or abatement of penalties and related interest.
- The claim is filed to preserve rights pending further guidance and final resolution of Kwong-related issues.
Step 3 – Include Supporting Documentation
Recommended attachments:
- Account Transcript highlighting penalty and interest assessments during the Kwong period. We also recommend highlighting all payments, credits, and adjustments in a different color to clearly document amounts already paid.
- Penalty notices (if available)
- Form 2848 copy, if filing as representative
Step 4 – Sign the Forms
Before mailing the claim, ensure that all Forms 843 are properly signed.
- The taxpayer (or authorized individual for a business entity) must sign and date Form 843. Authorized Representatives on Form 2848 can also sign on behalf of the Taxpayer.
- If a Representative is preparing and submitting the claim on behalf of the taxpayer, the representative should also complete and sign the Paid Preparer Use Only section.
- Use blue ink whenever possible to clearly distinguish original signatures from photocopies.
- Electronic signatures are not permitted on Form 843. The IRS currently requires original handwritten signatures for protective claims filed under the Kwong procedures.
- Unsigned Forms 843 may be rejected or returned, potentially jeopardizing timely filing before the July 10, 2026 deadline.
Recommendation: Review each Form 843 carefully before mailing to confirm all required signatures and dates are present. Retain a complete copy of the signed claim package for your records.
Step 5 – Mail the Claim
Mail Form 843 to the IRS address shown on the most recent notice related to the penalties or interest being challenged (for example, a CP14 balance due notice).
If the taxpayer did not receive a notice or the notice is no longer available, mail Form 843 to the IRS Service Center where the taxpayer would file the applicable tax return today. For individual income tax matters, use the filing address listed in the current Form 1040 Instructions for the taxpayer's state of residence.
We strongly recommend sending the claim by Certified Mail with Return Receipt Requested and retaining copies of all documents, proof of mailing, and delivery confirmation for your records.
Sample Documents Included
To help you file quickly, we have included:
Identify Kwong Opportunities in Minutes with PitBullTax
Reviewing hundreds of transcripts manually for potential Kwong claims can be a time-consuming process. PitBullTax helps automate that analysis.
The Kwong Opportunities section of the Transcripts Dashboard scans client transcripts and identifies taxpayers who may have been assessed penalties and related interest during the COVID disaster relief period. Instead of manually reviewing each account, practitioners can quickly generate a list of potentially eligible clients and prioritize those who may benefit from a protective claim.
For each opportunity identified, PitBullTax provides detailed information regarding the tax periods involved, the penalties assessed, related interest charges, and payments or credits applied to the account. This allows practitioners to efficiently evaluate potential claims, estimate refund opportunities, and prepare supporting documentation for Form 843.
With the July 10, 2026 deadline approaching, now is the time to review your client base and identify potential opportunities before the filing window closes.
Do not wait until the last week. Protective claims must be timely filed to preserve your clients' rights while the Abdo and Kwong litigation continues to develop.
If you have questions about locating Kwong opportunities within PitBullTax or would like a demonstration of the feature, please contact our team at 954-748-8255. We would be happy to assist you.
