If you have been hearing about the Kwong case and wondering whether it applies to you, new IRS guidance released just days before the July 10, 2026 deadline changes the picture significantly. Here is what taxpayers and tax professionals need to know before filing anything.
What Is the Kwong Case?
Kwong vs. United States, 179 Fed. Cl. 382 (Ct. Fed. Cl. Nov. 25, 2025), is a Court of Federal Claims decision holding that the IRS lacked the legal authority to assess failure-to-file and failure-to-pay penalties during the entire COVID-19 federally declared disaster period. Under IRC Section 7508A(d), the court found that filing and payment deadlines were automatically postponed from January 20, 2020 through July 10, 2023. Because those deadlines were legally suspended, the IRS had no basis to penalize taxpayers for missing them during that window.
The case is currently on appeal to the U.S. Court of Appeals for the Federal Circuit, which is why claims filed now are considered protective claims — filed to preserve your rights while the litigation plays out.
What Penalties Does Kwong Cover?
Not every penalty qualifies. Kwong applies specifically to failure-to-file penalties under IRC Section 6651(a)(1) and failure-to-pay penalties under IRC Section 6651(a)(2) and (a)(3), where the original due date fell inside the January 20, 2020 through July 10, 2023 window.
Penalties that are not covered include accuracy-related penalties under IRC Section 6662, estimated tax penalties under IRC Section 6654, and dishonored payment penalties. If you are unsure what type of penalty is on your account, pull your IRS account transcript first. The penalty code and description will tell you exactly what was assessed and when.
The Most Important Update: Do Not File If You Still Owe
This is the piece of the new guidance that changes everything for a lot of people.
If you still have an unpaid balance on the tax year you want to claim, do not file Form 843 right now. The IRS has stated clearly that if you file a Kwong claim while a balance remains on the account, they will send you a Letter 916C rejecting the claim outright. It will not be held as a protective claim. It will not be placed in a pending queue. It will be rejected as if it was never filed.
This matters because a rejected 916C claim does not preserve your filing date. You get no credit for having tried.
So what do you do instead? Wait until the balance is paid in full. Once payment is made, you have two years from that payment date to file your Form 843. There is no July 10, 2026 deadline pressure for unpaid balances. That deadline only applies to amounts that were already paid during the Kwong postponement window.
Who Should File Before July 10, 2026?
You should file before July 10, 2026 if all three of the following are true:
Your account has a failure-to-file or failure-to-pay penalty with a due date inside January 20, 2020 through July 10, 2023. Your balance for that tax year is paid in full. You have not already filed a Kwong claim for that year that was accepted.
If your balance is unpaid, wait. If your penalty is not an FTF or FTP penalty, Kwong does not apply. If you are unsure, review your transcript before filing anything.
How To File Form 843
If you do qualify and are ready to file, the IRS has provided updated instructions:
Write “Kwong vs. United States” across the top of Form 843. Check the Penalty box and select “reasonable cause or other reason allowed under the law” on Line 7. Use the Penalty box, Line 7(c) as your basis, and explain the full Kwong theory in Section 8 including the case citation, the disaster window dates, and the specific penalty type being challenged. Mail your completed Form 843 to: Internal Revenue Service, 1973 N Rulon White Blvd., Ogden, UT 84201. This address applies to all Kwong claims regardless of where you live.
What Happens Next?
Because Kwong is still on appeal, the IRS is expected to hold accepted protective claims in suspense rather than processing refunds immediately. If the Federal Circuit affirms the lower court’s decision, those claims move toward refund processing. If the decision is reversed, the claims are denied. Filing now, when you qualify, preserves your place in line either way.
If you have questions about whether your penalties qualify, contact our office before the July 10, 2026 deadline.
