The Tax Times

A quiet technical reading of the tax code has collided with three and a half years of continuous Covid disaster declarations—and the result may be one of the strangest timing glitches in modern federal tax administration. A recent court decision suggests that, for many taxpayers, key filing and payment deadlines were effectively “off” from January 20, 2020, through July 10, 2023. That raises a big practical question: now what? The case is Kwong v. United States, No. 23‑271T (Fed. Cl. Nov. 25, 2025).

For taxpayers, advisors, and the IRS, this is not an academic curiosity. It goes straight to whether millions in penalties, interest, and possibly tax were ever legally due in the first place.

How We Got Here: Disaster Relief Meets Continuous Emergency

Congress gave the IRS powerful tools to postpone deadlines when there is a federally declared disaster. During Covid, those disaster declarations became effectively nationwide and long‑running. The court at the center of this development took a close look at how those rules interact with a multi‑year, rolling disaster environment.

The key idea is that certain “required deadlines” are tolled during the disaster period for affected taxpayers. When you combine that tolling concept with a disaster period that ran from early 2020 into mid‑2023, you no longer have a modest postponement—you have a multi‑year gap where deadlines may not have run at all. Instead of pushing due dates by a few weeks or months, the interaction of the statutes and declarations appears to have suspended them outright.

In practical terms, that means a taxpayer who filed or paid “late” in 2021 or 2022 may not have been late at all under this reading. The calendar said delinquent; the statute, as interpreted by the court, may say timely.

What Deadlines Are Potentially Affected?

The decision and related commentary focus on a wide array of federal tax time limits, including, for at least some affected taxpayers:

· Annual filing deadlines, such as the April 15 due date for individual returns.

· Payment deadlines tied to those filings.

· Various penalty trigger dates for late filing and late payment.

· Potentially, certain statutes of limitation for assessment, collection, and refunds, depending on the fact pattern.

It is important to emphasize that the scope is not yet fully settled. Different Code provisions use different timing language. Some deadlines are expressly excluded from disaster relief rules. Others are arguably within the tolling language the court applied. Until appellate courts and IRS guidance draw sharper lines, practitioners are forced to work with a moving target.

The early takeaway, though, is simple: a lot of “late” behavior between 2020 and 2023 might not have been late under this interpretation.

Why Taxpayers and Advisors Are Moving Fast

Once the decision became public, tax attorneys and CPAs began doing what you would expect: running transcripts, pulling penalty summaries, and asking, “Where do we have money on the table?”

There are three immediate drivers of urgency:

1. Refund opportunity for penalties and interest
If deadlines were tolled, penalties and interest charged for “late” filing or payment during the covered period may be invalid. That opens the door to refund claims or amended returns seeking abatement and repayment.

2. Uncertain statutes of limitation
Ironically, the same timing rules that may help taxpayers also scramble the normal limitations framework. Advisors are filing protective claims now, before the government or the courts announce narrower readings that taxpayers then cannot retroactively rely on.

3. First‑mover advantage in a gray area
When the law is unsettled, well‑positioned taxpayers with good records and timely claims often obtain better outcomes than those who wait. Protective claims signal to the government that rights are being preserved and give practitioners room to negotiate or litigate later.

In other words, even if this theory is eventually trimmed back, many taxpayers don’t want to be the ones who did nothing while the window was open.

What This Means for the IRS

No tax agency welcomes a surprise three‑year suspension of its deadlines, especially when it hits at a time of resource constraints and heightened scrutiny. The IRS now faces several immediate challenges:

· Operational burden of claims
A wave of amended returns and refund claims strains processing capacity and adds complexity to an already difficult filing season.

· Litigation and appeal decisions
The government must decide whether to appeal the decision, in which courts, and on what theories, knowing that each move sends a signal to taxpayers and lower courts.

· Need for guidance
At some point, the IRS will have to tell taxpayers and practitioners how it reads the interaction of disaster‑relief rules and the Covid declarations going forward: which deadlines it views as tolled, for whom, and for what periods.

It would not be surprising to see the Service seek a legislative fix—either clarifying that these years were not intended to be fully tolling, or explicitly limiting the reach of disaster‑based extensions in future emergencies. Congress, of course, may or may not act quickly.

Practical Steps for Taxpayers and Practitioners

If you are a taxpayer or advisor trying to decide what to do, a structured approach helps.

1. Identify the relevant period
Focus on filings and payments that were due, and treated as late, between early 2020 and July 2023. This includes returns, extensions, and associated payments.

2. Pull IRS account transcripts
For individuals and entities with significant penalties or interest during those years, obtain transcripts and penalty computations. You’re looking for late‑filing and late‑payment penalties, and significant interest that flowed from those supposed delinquencies.

3. Evaluate fact patterns against the tolling theory
Not every deadline is likely covered, and not every taxpayer will fit the relevant disaster criteria. Work through the specific statutory deadlines implicated in each case, and whether they fall within the court’s reasoning.

4. Consider protective refund claims
Where there is a plausible position and meaningful dollars at stake, a protective claim preserves the right to a refund while the dust settles. The claim should clearly describe the legal basis, reference the relevant case, and note that the amount may be adjusted as law and guidance evolve.

5. Document expectations and risks with clients
Clients should understand that:

o The theory is currently in flux.

o The government may prevail on appeal or Congress may limit relief.

o Time and professional fees are being spent to keep their rights alive in a developing area, not to pursue a guaranteed result.

This kind of candid discussion avoids “found money” expectations and frames the project as risk management and opportunity capture.

What To Watch Next

In the coming months, several developments will be critical:

· Appellate decisions that either affirm, narrow, or reject the broad tolling interpretation.

· IRS administrative guidance that may support some limited relief while resisting the more sweeping consequences.

· Possible legislative action clarifying how disaster‑relief timing rules should and should not operate in the context of nationwide, long‑term emergencies.

For practitioners, this episode is a reminder of how much turns on the fine print of timing rules and cross‑references in the Code. For taxpayers, it is an unexpected second look at years they thought were closed—or hopeless.

If you work with clients who incurred meaningful penalties or interest between 2020 and 2023, now is the time to review accounts, identify potential cases, and decide where protective claims make sense.

The tax deadlines may have been “off” for three years, but the opportunity to correct what happened during that period won’t stay open forever.

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