Kwong v. United States Penalty Abatement: How to File a Form 843 Claim Before July 10, 2026

A small business owner in Lehi filed her 2020 partnership return five months late, paid the failure-to-file penalty under IRC §6698, and moved on. Almost five years later, a Court of Federal Claims ruling says she may be entitled to every dollar of that penalty back, plus the underpayment interest that ran with it, if she files the right form by July 10, 2026. The case is Kwong v. United States, and the form is Form 843. Kwong v. United States penalty abatement is the most consequential IRS refund opportunity I have seen in a decade, and the window to act on it is short.

The IRS has not conceded the issue and intends to appeal to the U.S. Court of Appeals for the Federal Circuit. That is exactly what a protective refund claim is designed for. File now to preserve the position, and let the appeal play out without losing the right to a refund.

On November 25, 2025, Judge Molly Silfen of the U.S. Court of Federal Claims issued the opinion in Kwong v. United States, 179 Fed. Cl. 382. The case turned on IRC §7508A(d), a 2019 statute that requires the Treasury Secretary to postpone certain federal tax deadlines during a federally declared disaster for the length of the incident period, plus an additional 60 days. The court held that the postponement is mandatory and self-executing. It does not require the IRS to issue a notice, and it cannot be shortened by regulation.

The court invalidated 26 C.F.R. §301.7508A-1(g)(3)(ii), the Treasury regulation that capped the mandatory §7508A(d) extension at one year. The statute, the court said, controls. A regulation cannot shrink what Congress wrote. Applied to the COVID-19 emergency, the FEMA-declared incident period ran from January 20, 2020 to May 11, 2023. Add the statutory 60 days, and the postponement period covered by §7508A(d) stretches all the way to July 10, 2023.

The practical implication is what makes Kwong matter. If every federal tax deadline falling between January 20, 2020 and July 10, 2023 was automatically postponed to July 10, 2023, then a return filed any time before that date was not late, and a payment made any time before that date was not late either. Failure-to-file penalties under §6651(a)(1), failure-to-pay penalties under §6651(a)(2), estimated-tax penalties under §6654 for individuals and §6655 for corporations, and underpayment interest under §6601 should not have started running during the postponement period at all.

This is not reasonable-cause abatement under §6651(a). It is not first-time abatement under the IRS's administrative policy in IRM 20.1.1.3.6.1. Both of those are discretionary, fact-specific, and frequently denied. The Kwong claim is different. It is a refund claim built on the position that the underlying penalty was never validly assessed in the first place, because the statutory due date had not yet arrived when the IRS started its clock.

Returns most likely affected are individual 1040s for tax years 2019 through 2022, partnership 1065s with late-filing penalties under §6698, S-corporation 1120-S returns with late-filing penalties under §6699, C-corporation 1120s, and the gift, estate, and trust returns whose original due dates fell inside the window. Households with a major real estate, equity, or business event during the pandemic are the ones most likely to have triggered the penalties this ruling addresses. Many of the high-income households I work with on real estate strategies had estimated-tax shortfalls during 2020 and 2021 when rental income, K-1s, and cost-seg timing all moved at once, and the §6654 penalties on those years are exactly the kind of assessment Kwong puts back on the table.

Under IRC §6511, a refund claim has to be filed within three years from the time the return was filed, or two years from the time the tax was paid, whichever is later. For penalties and interest that accrued during the COVID window, the relevant clock generally runs from the §7508A(d) postponement end date of July 10, 2023. Three years out is July 10, 2026. The National Taxpayer Advocate flagged that deadline in an April 2026 NTA Blog post and again in a follow-up walking through the protective-claim mechanics. Miss the date and no later court ruling can put the refund back within reach.

The appeal status matters here. The Department of Justice has indicated it intends to appeal Kwong to the Federal Circuit. The IRS has not started issuing refunds on its own and is unlikely to act on these claims while the appeal is pending. Most claims will be either suspended or denied administratively. A denial does not end the matter. Under §6532(a), a taxpayer has two years from the date of the notice of disallowance to file suit in district court or the Court of Federal Claims. The protective filing is what keeps that path open.

Form 843 is short. Two pages. Identify the tax period, the type of tax (income, employment, etc.), the type of penalty by Internal Revenue Code section, and the dollar amount being claimed. On Line 7, explain the basis. The version I have been using reads, in substance, that the penalty and interest at issue accrued during the §7508A(d) postponement period from January 20, 2020 through July 10, 2023, that under the holding in Kwong v. United States, 179 Fed. Cl. 382 (Nov. 25, 2025), the assessment was premature, and that the claim is filed as a protective claim under §6511 pending final resolution of the appeal. Writing "Protective Refund Claim Pursuant to Kwong v. United States" across the top of the form is the convention the NTA's guidance recommends.

File a separate Form 843 for each tax year and each type of tax. The form mails to the IRS service center where you would file your current-year return for the type of tax involved. Keep the original IRS notice that assessed the penalty (the CP14, CP161, CP504, or whichever applied), the bank or canceled-check record showing the penalty was actually paid, and a copy of the return that triggered the assessment. The IRS cannot refund a penalty that was never paid, so the strongest claims are the ones where the dollars already left the taxpayer's account.

Accuracy-related penalties under §6662, civil fraud penalties under §6663, and information-return penalties under §6721 and §6722 are not tied to a missed due date, and Kwong does not directly reach them. The §6698 partnership and §6699 S-corp late-filing penalties are tied to the due date, so those are squarely in scope. Kwong is also a federal decision. State penalties are governed by separate state statutes. Utah's late-filing and late-payment penalties under Utah Code §59-1-401 do not move because of a federal court ruling, and the same is true in California, New York, and every other state. States that automatically conform to federal due dates may have a parallel argument, but each one stands on its own statute.