Could You Be Owed a COVID-Era Tax Refund? What Businesses Should Know Now

Two recent court decisions—Kwong v. United States, 179 Fed. Cl. 382 (Nov. 25, 2025), and Abdo v. Commissioner (U.S. Tax Court, 2025)—are drawing attention for a practical reason: they may create new opportunities for businesses and high-net-worth individuals to recover interest and penalties paid during the COVID-19 pandemic.

While the legal details are complex, the core issue is straightforward. Courts are taking a closer look at whether federal tax deadlines were effectively paused for more than three years and whether taxpayers were charged interest and penalties during a period when those amounts may not have accrued.

Here’s what to know.

1. The timeline matters more than many taxpayers realize

At the center of both cases is Internal Revenue Code Section 7508A, which allows the IRS to postpone deadlines during federally declared disasters.

During COVID-19, the federal government declared a nationwide emergency beginning January 20, 2020. That emergency remained in place until May 11, 2023. When combined with the statute’s additional 60-day extension, the potential suspension period runs through July 10, 2023.

That timeline is critical. If courts ultimately agree that statutory deadlines were suspended for that full period, it could affect how interest, penalties, and filing deadlines were calculated across multiple tax years.

2. One court has already taken a broad view

In Kwong, decided November 25, 2025, the U.S. Court of Federal Claims addressed whether a taxpayer’s refund lawsuit was filed on time. The government argued it was too late under the standard two-year rule.

The court disagreed.

It held that the statutory disaster relief provisions suspended certain tax deadlines for the entire COVID disaster period, from January 20, 2020, through July 10, 2023, regardless of shorter extensions described in IRS notices. In other words, the statute itself, not IRS guidance, controlled.

While Kwong focused on a litigation deadline, its reasoning could apply more broadly to other time-sensitive tax rules.

3. A second case highlights interest-related concerns

In Abdo, the U.S. Tax Court examined how interest was calculated during the pandemic and whether taxpayers were charged in a manner consistent with COVID-era relief provisions.

The case reinforces a broader theme: courts are increasingly willing to question how pandemic relief was implemented, particularly where taxpayers incurred additional costs.

Together, Kwong and Abdo suggest that interest and penalty calculations from the COVID period may not be as settled as many assumed.

4. Where refund opportunities may exist

If the statutory suspension period is applied broadly, businesses and individuals may have grounds to revisit:

• Underpayment interest charged during 2020-2023
• Failure-to-file or failure-to-pay penalties
• Interest tied to installment agreements or audit resolutions
• Other time-based charges tied to delayed payments

For taxpayers with significant liabilities during the pandemic, even small changes in how interest is calculated can result in substantial refunds.

5. Timing is critical and more flexible than expected

Potential claims must be evaluated against applicable statutes of limitation, but the analysis may not be as straightforward as usual.

• Claims for additional overpayment interest are generally subject to a six-year limitations period from when the refund was scheduled
• Claims involving underpayment interest typically must be filed within three years of filing a return or two years from payment, whichever is later
• If a taxpayer entered into an agreement extending the IRS’s assessment period, a claim may be filed within six months after that extension ends

However, Kwong introduces an important wrinkle. If the COVID disaster period suspended the running of limitations periods, taxpayers may have additional time.

For example:

• A limitations period already running as of January 20, 2020, may have paused, remained suspended through July 10, 2023, and then resumed
• A limitations period that had not yet begun as of January 20, 2020, may not have started until July 10, 2023—potentially extending deadlines into 2026

These nuances can materially affect whether a claim is still viable.

6. This is a developing area—waiting may carry risk

It is important to note that Kwong reflects one court’s interpretation, and additional litigation is expected. The government may challenge similar claims, and higher courts may weigh in.

At the same time, statutes of limitation continue to run. For many taxpayers, the window to act may begin closing in 2026 or shortly thereafter.

As a result, many advisors are considering protective refund claims—filings that preserve a taxpayer’s rights while the legal landscape continues to develop.

The bottom line

The combination of Kwong and Abdo has created a narrow but potentially valuable opportunity: revisiting COVID-era tax payments to determine whether interest or penalties were overcharged.

Taxpayers who made significant payments between January 2020 and July 2023, or who received refunds during that period, may have reason to revisit their IRS interest computations and the timing of key filings.

Given the technical nature of these issues and the importance of timing, consulting with a tax attorney can help identify potential claims, evaluate applicable limitations periods, and determine whether protective filings make sense.

Travis Thompson is a Director in Fennemore’s Business & Finance practice group. Travis advises individual, corporate, and nonprofit clients on a broad spectrum of tax matters, with a particular emphasis on tax litigation, refund claims, voluntary disclosures, and cross-border compliance issues. He can be reached at tthompson@fennemorelaw.com.