Which IRS Penalties Qualify for a Kwong Refund?
The Kwong ruling applies to failure-to-file (§ 6651(a)(1)), failure-to-pay (§ 6651(a)(2)), and failure-to-deposit (§ 6656) penalties assessed during the COVID disaster period — plus the IRS interest that accrued on them. Form 1065, 1120-S, 5471, 8865, 941, and 4980H penalties may also qualify.
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Your Rights Under Kwong v. United States
Here's what happened, what it means for you, and how to take action before the deadline closes.
The Kwong Ruling
In Kwong v. United States, a federal court found that the IRS's mandatory COVID deadline extensions under § 7508A(d) meant the IRS was legally prohibited from assessing certain failure-to-file, failure-to-pay, and failure-to-deposit penalties — along with the interest that accrued on them — during the disaster period.
That disaster period ran from January 20, 2020 through July 10, 2023. If the IRS charged you penalties or interest during that window, those charges may have been improperly assessed, and you may be entitled to either a refund or a reduction in your balance.
What You May Recover
Depending on the penalties assessed against you and whether you've already paid them, outcomes typically fall into one of three categories:
- Full refund of penalty amounts (and related interest) you already paid during the disaster window.
- Balance reduction — improperly assessed penalties and interest are removed from what you still owe.
- Combination — partial refund of what was paid, plus abatement of what remains on the ledger.
Every case turns on transcripts and the specific penalty codes the IRS assessed. That's what our review looks at first.
How Damiens Law Handles Your Claim
Damiens Law is a boutique tax law firm — not a self-file software product. When we take on a Kwong case, we pull your IRS account transcripts, identify every penalty covered by § 7508A(d), calculate what was improperly assessed, and prepare and file the refund claim (typically on Form 843) or the penalty abatement request on your behalf.
If the IRS denies the claim, we handle the protest and appeals path too. You're represented by a tax attorney from start to finish.
The Filing Window
Refund claims under IRC § 6511 are governed by strict statutes of limitations. The practical deadline to file a related refund claim tied to the COVID disaster period is July 10, 2026. After that date, the door closes — even if the underlying penalty was improperly assessed, the IRS is no longer required to consider a refund.
If you think Kwong may apply to you, there is no reason to wait. A transcript review takes days, not months, and we'll tell you up front whether it's worth pursuing.
The Penalties and Additions to Tax Covered
Under § 7508A(a)(2), the disregard applies to any interest, penalty, additional amount, or addition to tax — so the categories are broad. Here are the ones that most commonly show up on transcripts.
Failure to File & Failure to Pay
The two most common individual penalties. FTF runs 5% per month (capped at 25%); FTP runs 0.5% per month (capped at 25%). Every month that fell within the disaster window is in play.
Failure to Deposit (Employment Tax)
The dominant penalty on Form 941 transcripts — 2%, 5%, 10%, or 15% of the late deposit. § 7508A(a)(1) expressly covers "payment of any employment tax or any installment thereof."
Trust Fund Recovery Penalty (TFRP)
The 100% trust-fund penalty assessed against responsible persons. The underlying penalty amount itself may not be abated, but interest that accrued on it during the disaster period is a strong candidate.
Estimated Tax Penalties
Individual and corporate estimated-tax underpayment penalties. Estimated tax installment due dates for tax years 2019 through 2022 fell within the disaster window.
ACA Employer Shared Responsibility
The "assessable payment" imposed on applicable large employers for failing to offer minimum essential coverage. Covered as an "additional amount" or "addition to tax."
Information Return Penalties
Fixed-dollar penalties for failure to file correct information returns (Forms W-2, 1099) or furnish correct payee statements. Covered for returns due within the disaster period.
Partnership & S-Corp Late Filing
Fixed-dollar monthly penalties for failure to file Forms 1065 and 1120-S. Covered for returns due within the disaster period.
International Information Return Penalties
$10,000 or $25,000 per form per year on Forms 5471, 5472, and 8865. Two statutory pathways apply depending on the form and the tax year in question.
Accuracy-Related Penalty
Potentially covered under a "crystallization" theory that shifts the measurement date. We raise this as a protective claim where a taxpayer paid before that date but did not underpay.
Your Path to Getting Money Back
A straightforward four-step process handled end-to-end by a tax attorney.
Check Eligibility
Answer a few quick questions above to see if your situation fits under the Kwong ruling. Takes about two minutes.
Pull Transcripts
With a signed Form 8821, we pull your IRS account transcripts and identify every penalty and interest charge in the disaster window.
Review & Estimate
A tax attorney reviews the findings and gives you a written estimate of what you may recover. No fee, no obligation.
File Your Claim
If you move forward, we prepare and file the Form 843 refund claim or abatement request and represent you through any IRS follow-up.
Joe Damiens
Who We Are
Damiens Law Firm, PLLC is a boutique tax law firm representing individuals and businesses before the IRS and state tax authorities. When you work with us, you get a team of tax attorneys focused on your file — not a call-center model and not generic software. For Kwong claims, that means your transcripts are read by an attorney, your Form 843 is prepared by an attorney, and your file is handled through any appeal or follow-up by an attorney. From offers in compromise to penalty abatement to unfiled returns and COVID-era refund claims, we handle the full range of tax controversy work.
Joe Damiens
Frequently Asked Questions
A federal court found that the IRS's mandatory COVID deadline extensions under § 7508A(d) meant the agency was legally prohibited from assessing certain penalties — and the interest that rode along with them — during the disaster period from January 20, 2020 through July 10, 2023. If the IRS charged you any of those penalties during that window, they may have been assessed improperly, and you may be able to get that money back or taken off your balance.
The disaster window covers any penalty or interest assessment whose underlying due date (or, in some cases, accrual period) fell between January 20, 2020 and July 10, 2023. In practical terms, that typically touches tax years 2019 through 2022, but it's the assessment date and accrual period that matter, not the tax year on the face of the return.
Yes. § 6656 failure-to-deposit penalties are the dominant penalty on Form 941 transcripts, and § 7508A(a)(1) expressly covers "payment of any employment tax or any installment thereof." If you're a business that was late on payroll deposits during the disaster window, that's squarely the kind of case Kwong addresses. FTD cases are frequently among the largest recoveries we see.
The Kwong decision (No. 23-267, U.S. Court of Federal Claims, Nov. 25, 2025) is a trial-level ruling. The government may appeal it, and it isn't binding precedent in every jurisdiction. Nothing here is a guarantee. That said, the statutory argument is strong, and filing a protective refund claim before the statute of limitations closes is a low-cost way to preserve your rights regardless of how appeals play out. We'll tell you honestly where your case fits on that spectrum during the review.
Not necessarily. The Kwong argument can still apply to unfiled or late-filed years — in fact, failure-to-file penalties are one of the main categories the ruling covers. If you have unfiled returns, that's useful context for us; it doesn't automatically disqualify you.
Form 8821 is a tax information authorization. It lets us pull your IRS transcripts and read them — nothing more. It's not a power of attorney and does not let us act on your behalf, sign for you, or agree to anything with the IRS. You can revoke it at any time. We only use it to confirm what's actually on your IRS account before we talk strategy.
The initial consultation and case review are free. If we take your case, we quote a flat fee tailored to what the claim requires before we start work — you'll know the cost before you commit. We do not take a percentage of your refund.
Yes. Refund claims under IRC § 6511 are governed by strict statutes of limitations. The practical deadline to file a related refund claim tied to the COVID disaster period is July 10, 2026. After that, the IRS is not required to consider a claim, no matter how strong the underlying argument is. Your exact deadline depends on your specific filing and payment history — consult a tax attorney for your situation.
If the IRS denies your refund claim, you have appeal rights — an administrative protest to IRS Appeals, and ultimately the option to sue for refund in U.S. District Court or the Court of Federal Claims. Because we file your claim as attorneys, we can represent you through any of those next steps without having to start over.
Yes. Information you share with Damiens Law is protected by attorney-client privilege from your first consultation. We do not rent, sell, or share your information with third parties.
Don't leave money on the table.
The window to file a Kwong penalty abatement or refund claim closes July 10, 2026. Check your eligibility and take action now.
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