If you filed a tax return, were required to file a tax return, or paid taxes during the taxable years of 2019 through 2022, you might still be eligible to request a refund of any interest and penalties paid for any failure to file, nonpayment, or late payment of taxes owned under a recent interpretation of the tax code’s rules for deadline extensions, but the deadline is quickly approaching (July 10, 2026). Section 7508A(a) of the Internal Revenue Code grants the Secretary of the Treasury the power to grant a one-year extension to taxpayers to file their taxes and request refunds in the aftermath of a federally declared disaster.
Background
In 2019, Congress added subsection (d) to 7508A, which granted an automatic extension for any “qualified taxpayer” in an area affected by a federally declared disaster. The extension began at “the earliest date of the incident specified in the declaration” and lasted to “the date which is 60 days after the latest incident so specified.” In 2021, Congress changed the language of subsection (d), which effectively changed the extension period to a maximum period of 60 days after the declaration was issued, not the end of the disaster itself. The 2025 amendment, and current version of the code, changed the extension time from 60 days after the declaration was issued to 120 days.
In the case of Kwong v. United States, the United States Court of Federal Claims effectively ruled that the 2019 version of section 7508A applies to all claims related to Covid-19 disasters because the 2021 amendment (and presumably the 2025 amendment) could only be applied to disasters declared after the amendment because the statute explicitly provided that it was only effective for disasters declared after the amendment was adopted. As such, the court found that the extension period began on January 20, 2020, the start of the emergency declaration, and ended on July 10, 2023.
Implications of the Kwong Case
Under normal circumstances, taxpayers are subject to certain filing deadlines and failure to file by the applicable deadline will result in failure to file (and potentially failure to pay) penalties. The Code also imposes significant interest normally incurred from the applicable due date of the payment. The COVID disaster declaration granted an automatic extension for both filing tax returns and paying income tax. This is unique to the COVID declaration and does not normally occur in other federal disaster declarations.
This means that if a taxpayer filed a return late during the COVID disaster relief period believing the deadline was April 15th, the taxpayer may be entitled to receive a refund of any interest and penalties paid during that period because their returns were not actually considered late as long as they were filed and any taxes were paid by July 10, 2023.
Remaining Uncertainty Around Kwong
The government appealed the Kwong decision on May 15, 2026, but as it currently stands, the relief period for qualified taxpayers to file timely refund claims may have extended to July 10, 2026. A refund claim is usually timely if the taxpayer files it within three years of the filing of a return or two years from the payment of taxes, whichever expires later. If the Kwong tolling period applies, taxpayers who filed returns or were required to file tax returns during the taxable years of 2019 through 2022, may be able to file a refund claim for any interest and penalties paid but only if the returns were filed before July 10, 2023 and the claim for refund is filed by July 10, 2026. Even though the Kwong case is currently being appealed and the case will likely not be finally resolved prior to the July 10, 2026 deadline, our recommendation is to file a protective claim for any refunds owed under these rules prior to the July 10, 2026 deadline.
There are many other legal issues to consider including whether a taxpayer is a “qualified taxpayer” entitled to extended relief, which is not addressed in this article. It is important for one to retain experienced tax counsel to navigate the refund process and to ensure one’s rights are protected.
For more information, or to seek counsel from our Taxation practice group, please reach out to request a consultation or call us at 216-696-1422.
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McCarthy Lebit would like to thank law clerk Logan B. Kijewski for his work in assisting with the preparation of this legal advisory for The More Report.
