COVID Tax Relief Update: What Kwong, Wepplo, and Abdo Could Mean for Penalty and Interest Refunds

If you were charged penalties or interest during the COVID period, you may have heard about Kwong v. United States, 179 Fed. Cl. 382 (2025). In Kwong, which the government is currently appealing, the U.S. Court of Federal Claims held that a provision of the tax code that suspends tax deadlines during official federal disasters covers the entire COVID disaster period, from 2020 to 2023. While Kwong remains unsettled, new developments provide encouraging signs that taxpayers may be entitled to refunds or abatements from penalties and interest paid or assessed during the COVID disaster period.

One such sign is that judges in other courts are taking the same questions seriously. For example, a current case in U.S. Tax Court, Wepplo v. Commissioner, potentially expands the impact of Kwong not only to deadlines during COVID but to interest payments on preexisting debt, a move that the court acknowledges would affect “a very large number of taxpayers.”

A deadline to file a “protective claim” by July 10, 2026 has now passed, but even taxpayers who have not filed a claim may still be able to obtain COVID tax relief depending on individual circumstances.

In November 2025, the U.S. Court of Federal Claims issued its decision in Kwong v. United States, 179 Fed. Cl. 382 (2025). The court held that Internal Revenue Code § 7508A(d) — the provision governing disaster-related postponements of tax deadlines — required an automatic suspension of federal tax filing and payment deadlines for the entire duration of the COVID-19 federal disaster period.

That period ran from January 20, 2020 (the date of the first confirmed U.S. COVID-19 case) through July 10, 2023 (60 days after the federal public health emergency formally ended on May 11, 2023).

Under the court’s reasoning, tax returns and payments due at any point within that window were not considered late until after July 10, 2023. This means the IRS should not have assessed certain penalties for late filing or payment during the entire 3.5-year period, nor charged interest on those amounts.

This interpretation is significantly broader than the limited administrative relief the IRS provided during the pandemic. If upheld, it could open the door to refunds or abatements for a wide range of taxpayers who owe COVID-era penalties or have COVID-era interest assessments — but the issue is far from settled.

The United States has appealed the Kwong decision to the U.S. Court of Appeals for the Federal Circuit, and the final outcome may take years to be decided. Similar issues are being raised in other pending litigation, and future court decisions could expand, narrow, or reject aspects of the ruling.

Kwong should not be treated as a settled conclusion that taxpayers are automatically entitled to refunds or abatements. The broader application of the case — including its impact on refund claims, penalty abatements, underpayment interest, overpayment interest, and other COVID-era penalty and interest issues — may ultimately depend on taxpayer-specific facts, future IRS guidance, and appellate outcomes.

The IRS will not issue refunds or abate penalties and interest on its own initiative. Taxpayers must file a claim for a refund or abatement by the appropriate deadline.

A protective claim is a placeholder filing with the IRS that meets a deadline while underlying legal issues are still being resolved. Typically filed using IRS Form 843, Claim for Refund and Request for Abatement, a protective claim can preserve potential rights while the appellate process plays out. Filing one costs relatively little, and failing to file can foreclose any future recovery.

Under the court’s reasoning in Kwong, the three-year statute of limitations on refund claims, measured from the extended deadline of July 10, 2023, closed on July 10, 2026.

Because the law is unsettled, the National Taxpayer Advocate recommended filing a protective claim by July 10, 2026 to preserve rights. In an April, 2026, report, National Taxpayer Advocate Erin Collins emphasized that relief does not happen automatically and that most taxpayers who wished to preserve their rights were required to file a refund claim, abatement request, or protective claim. The same report also noted that the IRS introduced an electronic filing option for certain individual claims that cite Kwong (with other taxpayers continuing to file paper claims).

While the July 10, 2026, deadline has now passed, there is still the possibility that an individual may be able to file a refund or abatement claim, because the applicable deadline may vary based on the type of claim, the tax period involved, assessment and payment dates, prior IRS action, pending examination or litigation status, and applicable limitation rules. Not every taxpayer will share the same deadline, and some claims may have already been time-barred before July 10.

If you filed a protective claim: keep proof of filing and monitor any IRS letters. If you did not file by July 10, 2026, there may still be options depending on your specific payment and filing dates, but the analysis becomes fact-specific and time-sensitive. You should move as quickly as possible to explore any remaining opportunities.

Wepplo v. Commissioner of Internal Revenue is a related case in Tax Court. While Kwong addresses deadlines during the COVID disaster period, Wepplo involves interest charged on earlier tax deficiencies. In Wepplo, the taxpayers argue that, under the same statute as Kwong, interest previously owed should not have been collected during the entire 3.5-year period of the COVID disaster.

Wepplo remains pending; there is no final decision yet. But the Tax Court has signaled the importance of Wepplo by taking the unusual step of inviting amicus briefs in the case, because the case “appears to affect a potentially very large number of taxpayers.” This suggests the court views this as a major issue with broad impact.

An amicus curiaeor “friend of the court” brief is a written submission from a person or organization that is not one of the parties in the case, but who can provide helpful perspective to the court. In plain English: the court is asking knowledgeable outsiders to weigh in, because the decision could impact many taxpayers.

Multiple amici that have now been submitted argue that the statute’s text suspending deadlines should be taken as written, and that courts should not adopt the narrower IRS regulatory reading. 

Abdo v. Commissioner is an earlier Tax Court case that laid the legal groundwork for both Kwong and Wepplo. In the Abdo Tax Court decision, the court rejected the government’s restrictive reading of Internal Revenue Code § 7508A(d) and held that relief under the statute is “unambiguously self-executing.” In other words, based on reading the plain language of the IRS code, the IRS was required to suspend deadlines during the COVID disaster.

Abdo, Kwong, and Wepplo all share this argument that the plain language of the statute required the IRS to suspend its deadlines during the COVID disaster. From this, all three cases argue that the IRS’s narrow interpretation of the statute and resulting regulations should be overturned.

The implications of the three cases build from Abdo, which found only that a 60-day extension was required, to Kwong, which expanded the coverage to all deadlines within the 3.5-year federal disaster period, to Wepplo, which adds interest on preexisting debts into consideration.

While none of these developments guarantee success for taxpayers on the Kwong appeal, the signs are positive that taxpayers may be able to claim refunds or abatements.

One such sign is that courts continue to examine the issue, with multiple judges addressing similar statutory questions across multiple cases. Another is that the Tax Court has already rejected parts of the government’s restrictive reading in Abdo. And it is also encouraging that similar taxpayer-friendly reasoning appears in multiple cases across different fact patterns.

Available information indicates that the IRS is already building intake infrastructure for Kwong refund claims but “lacks a definitive rule to apply.” In other words, the IRS recognizes the volume and significance of these claims—but it is waiting for clearer direction from litigation or guidance. 

Many taxpayers still have an interest in the outcome of Kwong and its related cases. These may include individuals, corporations, partnerships, S corporations, LLCs, trusts, estates, and nonprofits.

If you have protective claims pending, an ongoing disputed claim, or remaining refund opportunities, the outcome will be relevant to you.

If you filed a protective claim, you are in a favorable position to be able to receive a refund or abatement if the legal cases are resolved favorably. In the meantime, keep your records: retain mailing receipts or any electronic confirmations you received, and review any new IRS communications promptly.

If your claim is denied, don’t ignore the denial. There may be steps you need to take to keep the process moving forward. Understand the response deadlines and seek advice before taking action.

If you haven’t filed a claim yet, you may still have options. Determine whether any other refund deadlines remain that may still be open based on your specific facts.

The Tax Court’s recent actions in Wepplo and its prior decision in Abdo provide additional support for the taxpayer-friendly interpretation underlying Kwong. However, because the government has appealed Kwong, the law remains unsettled. Taxpayers who preserved their rights through timely protective claims may be positioned to benefit if the courts ultimately adopt the broader interpretation, but no outcome is guaranteed.

Questions about how these developments may affect your tax position? Speak with one of our tax professionals to evaluate your options and determine whether protective claims or other strategies may be appropriate for your situation.