Could the IRS Owe You Money? What Taxpayers Need to Know About the Kwong v. United States Ruling

For most taxpayers, interactions with the IRS typically involve questions about taxes owed, outstanding balances, or compliance obligations. However, a recent federal court decision has raised the possibility that some taxpayers may actually be entitled to money back from the IRS. 

The case, Kwong v. United States, has emerged as one of the most significant taxpayer-rights developments in recent years. The ruling centers on how the IRS applied certain penalties during the COVID-19 pandemic and could affect taxpayers who filed returns or paid taxes late during the federally declared disaster period. While the legal issues are complex, the decision may create refund opportunities for qualifying taxpayers who were assessed certain penalties during that time.  

What Happened in Kwong v. United States? 

In Kwong v. United States, a federal court held that the IRS’s mandatory COVID-era deadline extensions under Internal Revenue Code Section 7508A(d) effectively prohibited the agency from assessing certain failure-to-file and failure-to-pay penalties during the covered disaster period. 

As a result, some taxpayers who were charged these penalties may have been assessed incorrectly and could be entitled to refunds or other relief. 

While the legal issues involved are nuanced, the practical takeaway is straightforward: taxpayers who incurred certain IRS penalties during the COVID emergency period may want to review their accounts to determine whether they qualify for relief. 

Why Does This Matter? 

For many taxpayers, penalties and interest can become one of the most expensive components of a tax liability. Even relatively modest penalties can accumulate over time, increasing the overall financial burden. 

Industry experts estimate that the amount of penalties and interest potentially affected by the ruling could be substantial. However, eligibility depends on a taxpayer’s specific circumstances, and not everyone who paid penalties during the pandemic period will qualify for a refund. 

Who Should Pay Attention? 

The ruling may be particularly relevant for taxpayers who: 

• Filed tax returns late during the COVID disaster period 

• Paid taxes after their original due date 

• Received IRS assessments for failure-to-file or failure-to-pay penalties during the covered timeframe 

• Previously paid those penalties and never challenged the assessment 

Because eligibility can depend on a variety of factors, determining whether a refund claim is available often requires a detailed review of a taxpayer’s filing history and IRS account records. 

Time May Be Running Out 

One of the most important aspects of the Kwong decision is timing. Taxpayers seeking to preserve potential refund rights may face filing deadlines that could limit their ability to recover money if they wait too long. 

For that reason, individuals who believe they may have been affected should consider reviewing their tax records promptly and seek to file before the July 10, 2026 deadline passes. 

Next Steps 

The Kwong v. United States ruling represents a potentially significant development in taxpayer rights and IRS penalty administration. While not every taxpayer will qualify for relief, the decision underscores the importance of reviewing past IRS assessments and understanding whether penalties were properly imposed. 

For taxpayers who paid certain failure-to-file or failure-to-pay penalties during the COVID-era disaster period, there may be an opportunity to recover money that was previously thought to be owed. To help simplify the process, EasAly launched CovidTaxRefunds.com, a platform designed to help taxpayers evaluate whether they may qualify for relief under the Kwong ruling and better understand the steps available to preserve potential refund claims before applicable deadlines expire. Taxpayers should act quickly to review their records and file before the July 10, 2026 deadline.