failure to file Archives | TAX CONTROVERSY 360

Major update: Potential refund opportunity for interest and penalty amounts accrued during COVID-19 federally declared disaster

by Shawn O’Brien and Samuel F. Hamer | Dec 8, 2025 | Court Procedure Matters, IRS Appeals, IRS Audits, Penalties, Settlements, Significant Court Decision, Tax Refunds

The US Court of Federal Claims’ (CFC) recent decision in Kwong v. United States, No. 23-267 (Fed. Cl. Nov. 25, 2025), provides significant support for the potential refund opportunity we identified in a previous blog post titled, “Refund opportunity for interest and penalty amounts accrued during COVID-19 federally declared disaster.” The refund opportunity applies to taxpayers who made payments to the Internal Revenue Service (IRS) that included underpayment interest and/or failure-to-file/failure-to-pay penalties that accrued during all or part of the period from January 20, 2020, through July 10, 2023.

Although the CFC’s holding in Kwong addressed whether Internal Revenue Code (IRC) § 7508A provided the taxpayer an extension of the two-year statute of limitations deadline for filing a refund suit (in IRC § 6532(a)) that fell after the COVID-19 disaster was declared, Kwong answered important questions for those taxpayers pursuing refunds for underpayment interest and/or failure-to-file/failure-to-pay penalties that accrued during COVID-19. The CFC held that the 2019 version of IRC § 7508A applies to the COVID-19 federally declared disaster. This is a significant holding because Congress amended IRC § 7508A in 2021 to significantly limit the IRC § 7508A(d) mandatory extension period. The CFC also held that the IRC § 7508A(d) mandatory extension period, as applied to the COVID-19 disaster, commenced on January 20, 2020, and ended on July 10, 2023.

Kwong has potentially sweeping implications for taxpayers who faced federal tax filing and/or payment deadlines that fell between January 20, 2020, and July 10, 2023. Under the CFC’s Kwong analysis, the deadline for payment of any federal tax falling between these two dates was extended to July 11, 2023. Since the IRS computes underpayment interest and/or failure-to-file/pay penalties from the payment due date, penalties should not accrue from January 20, 2020, through July 10, 2023, and any taxpayers who already paid these amounts may be entitled to a refund. The CFC’s analysis also does not rule out the possibility that taxpayers with payment due dates preceding January 20, 2020, may be entitled to relief to the extent the underpayment interest and/or failure-to-file/failure-to-pay penalties accrued during the COVID-19 disaster period.

As noted in our previous post, taxpayers considering this refund opportunity should be aware that the statute of limitations to file a refund claim expires three years from the filing deadline of the original tax return or two years from the date on which payment was made, whichever is later (unless the statute of limitations period was otherwise extended). This refund opportunity may apply to underpayment interest and/or penalties paid with respect to federal income, estate, gift, employment, or excise taxes.

Potential Refund Opportunity for Interest and Penalty Amounts Accrued During COVID-19 Federally Declared Disaster

by Shawn O’Brien and Samuel F. Hamer | Jun 12, 2025 | IRS Appeals, IRS Audits, Settlements, Tax Refunds, Trial Courts

Taxpayers who made payments to the Internal Revenue Service (IRS) that included underpayment interest and/or failure-to-file/pay penalties that accrued during all or part of the period between January 20, 2020, through July 10, 2023, should consider filing a refund claim with the IRS to potentially recover accrued interest and penalty amounts.

Internal Revenue Code (IRC) § 7508A (as in effect during the COVID-19 pandemic), legislative history, regulations, and the US Tax Court’s opinion in Abdo v. Commissioner, 168 T.C. 148 (2024), provide the basis for potential refund claims. IRC § 7508A(d) provides for a mandatory postponement period of certain tax-related obligations, including the suspension of the accrual of underpayment interest for the duration of the COVID-19 incident period plus 60 days (January 20, 2020 – July 10, 2023). IRC § 7508A also appears to have paused the increase of failure-to-file/pay penalties, which are based on the time during which the taxpayer is not in compliance.

Taxpayers considering this refund opportunity should be aware that the statute of limitations to file a refund claim expires three years from the filing deadline of the original tax return or two years from the date on which payment was made – whichever is later (unless the statute of limitations period was otherwise extended). This refund opportunity may apply to underpayment interest and/or penalties paid with respect to federal income, estate, gift, employment, or excise taxes.

Statutes of Limitation in the International Tax Context

by Elizabeth Chao and Lowell D. Yoder | Oct 19, 2017 | IRS Audits, IRS Guidance, Trial Courts, Uncategorized

As most taxpayers know, under Internal Revenue Code (Code) Section 6501(a), the Internal Revenue Service (IRS) generally has three years after a tax return is filed to assess any additional tax. However, Code Section 6501 provides several exceptions to this rule, including but not limited to the following.

False or fraudulent returns with the intent to evade tax (unlimited assessment period)
Willful attempt to defeat or evade tax (unlimited assessment period)
Failure to file a return (unlimited assessment period)
Extension by agreement (open-ended or for a specific period)
Adjustments for certain income and estate tax credits (separately provided in specific statutes)
Termination of private foundation status (unlimited assessment period)
Valuation of gifts of property (unlimited assessment period)
Listed transactions (assessment period remains open for one year after certain information is furnished)
Substantial omission of items (six-year assessment period)
Failure to include certain information on a personal holding company return (six-year assessment period)

If the IRS issues a notice of deficiency and the taxpayer files a petition in the Tax Court, the statute of limitations on assessment is extended until after the Tax Court’s decision becomes final. See Code Section 6503(a); see also Roberson and Spencer, “11th Circuit Allows Invalid Notice to Suspend Assessment Period,” 136 Tax Notes 709 (August 6, 2012). (more…)