COVID-Era IRS Penalties: What the Kwong Appeal Means for South Florida Businesses

In November 2025, the U.S. Court of Federal Claims ruled in Kwong v. United States that COVID disaster relief paused federal tax deadlines for the entire federal disaster period, from January 20, 2020 through July 10, 2023. Under that reading, returns and payments due inside the window weren’t late until after July 10, 2023.

If the ruling holds, businesses that paid IRS late-filing penalties, late-payment penalties, or interest on deadlines in those years could be owed money back.

The protective claim deadline most owners heard about was July 10, 2026, and it has passed, so many assume the chance is gone.

Schedule a call with our team in Coral Springs or Fort Lauderdale to review your COVID-era IRS penalties.

The Government’s September Brief Keeps the Outcome Open

The ruling is on appeal. In its opening brief to the U.S. Court of Appeals for the Federal Circuit this month, the government argued that the lower court turned a 60-day extension into a postponement lasting more than three years. It asked the appeals court to reverse the decision and dismiss Terry Kwong’s refund claims for 2007, 2010, and 2011 as untimely.

The government also warned that the ruling could reach tens of millions of taxpayers and tens of billions of dollars in refund claims.

A related case in the U.S. Tax Court, Wepplo v. Commissioner, asks whether the same rule stopped interest on older tax debts during those years. The Tax Court took the unusual step of inviting outside briefs because the case could affect a large share of taxpayers. None of this guarantees a result, and a final answer could take years.

Business Owners Have the Most at Stake

Individuals who paid a late-filing penalty on a 2020 return have a stake in Kwong. Business owners often have more, because a business faces more federal deadlines each year and more penalties that can stack.

A restaurant files payroll returns every quarter and makes payroll tax deposits on a fixed schedule. A medical practice or IT firm organized as an S corporation or partnership files an entity return with its own due date and its own late-filing penalty per owner, per month. During 2020 and 2021, plenty of South Florida businesses fell behind on those deadlines while they dealt with closures, staffing gaps, and loan paperwork.

Take a Fort Lauderdale restaurant that filed two 2021 payroll returns late and paid about $8,000 in penalties and interest to clear them. Under the Kwong reading, those deadlines may not have passed yet when the returns were filed, so those charges could be refundable. Attorneys tracking the case list payroll and other federal tax penalties on business accounts among the charges it may reach.

One limit applies to every Florida owner. Kwong is about federal tax deadlines, so Florida sales tax and reemployment tax penalties fall outside it.

If You Filed a Protective Claim, Keep Your Proof and Watch Your Mail

A protective claim, usually filed on Form 843, holds your place while the courts decide. If you filed one, the job now is to keep your mailing receipt or electronic confirmation and read every IRS letter that arrives.

The letter that matters most is a denial. Once the IRS mails a claim denial, you generally have two years to file a refund suit. Letting that clock run out can end the claim even if the appeals court later rules for taxpayers.

If You Didn’t File by July 10, You May Still Have Options

The July 10 date came from one calculation: three years after the end of the disaster period as the court defined it. It was the right date for many taxpayers, and it wasn’t the only one.

Refund deadlines depend on the type of claim, the tax period, when the penalty was assessed, when you paid it, and whether the IRS has already acted on your account. The National Taxpayer Advocate has stressed that relief isn’t automatic and requires a claim, and firms tracking the case note that some taxpayers who missed July 10 may still have open deadlines based on those dates.

The payment date is often the deciding detail. A taxpayer generally has two years from the date a tax or penalty was paid to claim a refund of it. A business that paid off a 2021 penalty in late 2024 through a payment plan may still be inside that window for those payments, even though the July 10 date has passed. A medical practice that paid off a 2020 late-filing penalty in March 2025 would generally have until March 2027 to claim it back.

That means “I missed the deadline” is a question to check against your own records before you accept it as the answer.

Unpaid Penalties Can Still Be Challenged

If the IRS assessed a COVID-era penalty and you still owe it, the request is an abatement, which asks the IRS to remove the charge from your account. The National Taxpayer Advocate has pointed out that taxpayers can file protective claims for abatement of penalties and interest assessed but not yet paid.

This matters for businesses on installment agreements. Part of what you’re paying each month may be penalties and interest from 2020 through 2022, and those charges can be challenged while they’re still on the books.

Schedule a call with our team in Coral Springs or Fort Lauderdale to review your COVID-era IRS penalties.

First-Time Abatement Still Applies Regardless of Kwong

Kwong is one path to relief, and it’s still being litigated. The IRS’s first-time abatement policy is settled and available today for many of the same penalties.

First-time abatement can remove a failure-to-file, failure-to-pay, or failure-to-deposit penalty for one tax period if you had a clean penalty history for the three prior years and have filed all required returns. Reasonable cause, such as a documented closure or illness during COVID, is another established route. Using one of these doesn’t depend on how the Federal Circuit rules.

Pull Your IRS Transcripts to Find Out What You Have

Every option above depends on facts that sit in your IRS account transcripts. The first step is to pull the account transcripts for each business and personal tax period from 2019 through 2022.

Map every charge to its date. For each penalty and interest line, note the original due date, the assessment date, and the date you paid it. That separates charges tied to deadlines inside the disaster window from charges that fall outside it.

Sort paid from unpaid. Paid charges point toward a refund claim, and the payment date tells you whether the refund window is open. Unpaid charges point toward an abatement request.

Check for IRS action. A prior claim, a denial, or an examination changes your deadlines. The transcripts show those events, including dates you may not remember.

Line up the alternatives. For each penalty, check whether first-time abatement or reasonable cause could apply now, so you have a route that works regardless of the appeal.

Venti is led by an Enrolled Agent, a federally licensed tax practitioner with unlimited rights to represent taxpayers before the IRS. With a signed Form 2848, our team can pull these transcripts, file claims and abatement requests, and respond to the IRS for you. It’s the same work behind our IRS notice and tax resolution support, and if you’re already on a payment plan, it’s worth reviewing alongside the installment agreement options you have.

Know Your Numbers Before the Federal Circuit Rules

When the Federal Circuit decides Kwong, owners who already know which charges qualify and which deadlines are still open can act the same week. Owners who start then will spend the first month requesting transcripts.

A transcript review now tells you what Kwong could be worth to your business and which relief you can pursue without waiting for the appeal.

Schedule a call with our team in Coral Springs or Fort Lauderdale to review your COVID-era IRS penalties.

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FAQ

What is Kwong v. United States? Kwong v. United States is a November 2025 Court of Federal Claims decision holding that COVID disaster relief paused federal tax deadlines from January 20, 2020 through July 10, 2023. The government has appealed to the Federal Circuit.

Can I still get a refund of COVID-era IRS penalties after July 10, 2026? Possibly. Refund deadlines depend on the type of claim, the tax period, and when the penalty was assessed and paid. Some taxpayers who missed July 10 may still have open deadlines, which a transcript review can confirm.

Does Kwong cover business payroll tax penalties? It may. The ruling addresses federal tax deadlines generally, and practitioners tracking the case list payroll and other federal tax penalties on business accounts among the charges it could reach. The appeal could narrow that.

Does Kwong apply to Florida state tax penalties? No. Kwong addresses federal tax deadlines, so Florida sales tax and reemployment tax penalties are outside it.

What should I do if the IRS denies my Kwong claim? Don’t ignore it. After the IRS mails a claim denial, you generally have two years to file a refund suit, and missing that deadline can end the claim.

Is there another way to remove COVID-era IRS penalties? Yes. First-time abatement can remove a failure-to-file, failure-to-pay, or failure-to-deposit penalty for one period if you had a clean penalty history for the prior three years and have filed all required returns. Reasonable cause is another option.