Taxpayers have often struggled with shifting tax filing deadlines and complex IRS penalty calculations. But if some of those filing deadlines were legally postponed by an act of Congress, certain penalties and refund interest may have been incorrectly calculated by the IRS, entitling impacted taxpayers to relief. A recent federal court case may offer some taxpayers an opportunity to seek abatement or refunds of penalties and, in some cases, claims for interest the IRS should have paid on tax refunds.
The issue is technical, but the potential relief is straightforward and could be significant. The case could help taxpayers with late filings or assessments where the tax filing deadline fell between early 2020 and mid-2023 (this would mainly cover 2019–2022 tax returns). While the case can apply generally, it may be especially helpful for U.S. persons overseas, who often file on extensions or discover continuing filing obligations only after several years.
Kwong Court Interpretation: Tax Deadlines Were Mandatorily Postponed By Congress
In Kwong v. United States, No. 23-267 (Fed. Cl. Nov. 25, 2025), the U.S. Court of Federal Claims ruled that a disaster-relief provision in the tax code, combined with nationwide COVID-19 presidential declarations, required a mandatory postponement of many federal tax deadlines. The period ran from January 20, 2020, through July 10, 2023.
Under this view, deadlines for filing returns, paying taxes, or filing refund suits that fell within that window shifted to July 11, 2023. For example, a 2019 income tax return that was originally due April 15, 2020 (and later administratively extended by the IRS due to COVID) would, under the Kwong interpretation, be treated as legally due on July 11, 2023. The IRS argued for shorter suspension periods, but the court rejected those arguments, focusing on the statute’s plain language.
Protective Claims Being Filed
The IRS disagrees with Kwong’s broad interpretation and is expected to appeal. In the meantime, taxpayers are filing protective claims to preserve their rights. A protective claim states that it depends on the court’s interpretation surviving appeal. Filing now safeguards the taxpayer’s position. If higher courts uphold the postponement to July 11, 2023, the IRS may be prevented from rejecting the claim solely on statute-of-limitations grounds. Protective claims do not guarantee success, but they preserve the issue.
Why Kwong Matters Especially for Americans Abroad
U.S. citizens and green-card holders living overseas often file on automatic extensions (e.g., to June 15), submit returns late after discovering obligations, or use IRS offshore compliance procedures such as the Streamlined Foreign Offshore Procedure to catch up on late filings. Many such filings or payments happened during this 2020–2023 window. The ruling raises a simple question: If a return or payment was not legally due until July 11, 2023, can penalties or interest have properly accrued earlier? In some cases, the answer may be no.
Penalties for Late Income Tax Returns and Foreign Asset Reporting
Failure-to-file and failure-to-pay penalties depend on statutory due dates. Under the Kwong rationale, if those dates shifted to July 11, 2023, taxpayers may argue that penalties for affected years should be abated or previously paid penalties should be refunded. This requires filing claims (e.g., Form 843 or amended returns) and possibly litigation if denied.
Americans abroad typically must file information returns for non-U.S. financial assets (e.g., stock in a foreign corporation, foreign mutual funds) and non-U.S. financial accounts. The Kwong argument is especially strong with respect to penalties for Form 8938 (Statement of Specified Foreign Financial Assets), which follows the income tax return deadline with no independent due date. If the return deadline was postponed, Form 8938 penalties may also be challengeable for the period. FBARs (FinCEN Form 114), however, are a different story. The FBAR filing rules and penalties for FBAR failures fall under the Bank Secrecy Act rather than the Internal Revenue Code, and would not be affected by Kwong.
Interest on Taxes Owed
Normally, if a taxpayer misses a tax payment deadline, interest begins accruing immediately. In Kwong, the court concluded that many payment deadlines were pushed to July 11, 2023. If that interpretation stands, interest tied to the statutory due date may not have begun accruing until July 11, 2023, if that date was legally postponed. No legal due date means no interest for being late.
Taxpayers who paid such interest (or still have it on their bill), may seek a refund. The IRS strongly disagrees and is likely to appeal, but if the ruling is upheld, the potential savings could be significant.
Interest on Refunds: One of the Strongest Opportunities Here
Normally, the IRS pays no interest on a refund if the return is filed late, even if the government held the overpayment for a while. The Kwong ruling could change that for income tax returns originally due between 2020 and mid-2023.
If deadlines were postponed to July 11, 2023, returns once seen as late could be treated as timely. That would allow statutory overpayment interest to run from the applicable overpayment date (which often ties to the original due date), rather than from the actual filing date.
Overpayments often build up long before filing. This can happen, for example, for U.S. taxpayers who make excess estimated tax payments. The excess sits with the IRS from that point. Under usual rules, late filing blocks interest until the actual return arrives. Kwong could fix this by deeming the return timely, letting interest run from the earlier overpayment date and potentially boosting the refund. This relief stands out for U.S. taxpayers abroad, who frequently rely on the automatic June 15 extension, or who file amended returns for refunds (e.g., claiming missed foreign tax credits).
The IRS often issued refunds without interest during 2020–2023, because the returns were treated as having been filed late. If the Kwong view prevails on appeal, taxpayers may claim the missed interest.
A key caveat is that claims must generally be filed within three years of the return filing date or two years of payment (whichever is later). The Kwong postponement logic might arguably extend those periods in some cases, but it’s not guaranteed. Taxpayers should review returns promptly and consult a tax professional about protective claims.
Practical Steps
Taxpayers should review IRS transcripts and notices and look for penalties or interest relating to returns with deadlines falling during 2020–2023. They should also examine whether refunds received during that period were paid without interest because the return was treated as late. If potential issues exist, taxpayers should discuss protective filings with tax counsel and act promptly.
The Kwong decision may help where taxpayers believed they had missed the legal deadline to claim or sue for a refund of overpaid taxes. Since the Kwong court concluded that pandemic disaster relief suspended certain tax deadlines, some refund claims or refund lawsuits that appeared time-barred may still be considered timely. The ruling may also support claims for interest on tax overpayments.
The Bottom Line
The Kwong ruling does not create a tax holiday nor does it dismiss tax noncompliance. It interprets a provision of the tax law in a manner that could provide relief in IRS assessments covering the timing of refunds, penalties, and interest. For Americans abroad and international investors, it may serve as an additional argument in negotiations with the IRS.
In the complicated world of international tax, even narrow judicial relief can make a difference. Taxpayers may need to examine these issues carefully and promptly while the matter remains unsettled in the courts.
Posted March 5, 2026
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First published on Forbes February 24, 2026
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