A recent court decision marks a significant development in the interpretation of section 7508A and its impact on federal tax filing and refund deadlines during the COVID‑19 disaster period. In Kwong v. United States, 179 Fed. Cl. 382 (2025), the U.S. Court of Federal Claims held that the version of section 7508A in effect during the pandemic tolled certain statutory tax deadlines for the entirety of the federally declared disaster period, plus the statutorily mandated 60 days – resulting in an automatic postponement period that began on Jan. 20, 2020, and ended on July 10, 2023.
In Kwong, the taxpayer filed requests for abatement, seeking refunds for the penalties he had paid for prior tax years. In September 2020, the IRS issued notices of disallowance for claims related to three prior tax years. In 2023, Mr. Kwong filed suit seeking refunds of the penalties paid. Because section 6532(a) provides that suit must be filed within two years from the date the notices of disallowance were mailed, the government argued that Mr. Kwong's claims are untimely for those three underlying tax periods.
The Court, however, relied upon Federal Emergency Management Agency designation of May 11, 2023, as the end of the COVID-19 incident period. In fact, the Court’s decision hinged on the plain language of the 2019 Congressional amendment of section 7508A(d) - where the period of postponement began “on the earliest incident date” and ended “on the date which is 60 days after the latest incident date.” As a result, the applicable tax deadlines were effectively postponed through July 10, 2023.
Although Congress amended section 7508A(d) in November 2021 to change how the end of the postponement period is calculated, the Court explained that this amendment does not apply retroactively. Because the COVID‑19 disaster period occurred while the 2019 version of section 7508A(d) was in effect, that earlier version governs. As a result, the postponement period is determined under the 2019 statute—not the later amendment—and extends through 60 days after the end of the federally declared disaster period.
Kwong arose from a refund suit challenging the IRS’s denial of a refund claim and held that the action was timely if filed on or before July 11, 2023, where the applicable statute of limitations would otherwise have expired during the COVID‑19 disaster period. But the Court recognized that the postponement period in section 7508A also applies to “any” tax liability, as stated in section 7508A(a)(2), which includes the accrual of interest, penalties and additional amounts or additions to tax.
Because section 7508A applies to certain federal tax filing or payment deadlines falling within the postponement period, this decision has far-reaching implications for penalty and interest assessments affecting income and employment tax returns. If the decision stands, taxpayers that filed amended forms 941 to claim the employee retention credit (“ERC”) for a COVID-19 affected period may have an avenue for relief. Under early IRS guidance, employers were required to amend their income tax returns to reduce wage deductions that corresponded to ERC-qualified wages on the related amended Form 941 ERC claim. Compliant taxpayers timely filed amended income tax returns to reduce the wage deduction and underpayment interest was assessed on the resulting balance due. After the IRS later imposed a moratorium on processing ERC claims, many affected taxpayers had paid the assessed interest even though the IRS had not yet processed or paid the underlying ERC claim.
Though affected taxpayers would have incurred underpayment interest or penalties during this postponement period, the statute of limitations may preclude taxpayer’s ability to file a refund claim requesting abatement. Under section 6511, the statute of limitations for refund claims generally runs three years from the time the return was filed or two years from the time the tax was paid – whichever is later.
The statute of limitations for pandemic-related filings and payments is a threshold criterion and taxpayers should consult their tax advisors to determine eligibility. With the assistance of their tax advisors, taxpayers can review account transcripts to identify interest and/or penalty assessments tied to the postponement period under the Court’s analysis. Affected taxpayers should consider filing a request for interest and/or penalty abatement via Form 843, Claim for Refund and Request for Abatement. If the ruling is appealed, submitting a protective claim before the expiration of the statute will preserve the claim in the event subsequent appellate decisions modify the Court of Federal Claims’ interpretation.
