If you filed a claim with the IRS asking for COVID-era penalties and interest back, keep an eye on your mail. The IRS has started sending letters that deny those claims or refuse to consider them, and for many taxpayers that letter does more than say no. It can start a two-year deadline that keeps running whether or not you are still talking to the IRS.

The National Taxpayer Advocate has asked the IRS to stop issuing these denials while the courts sort out the law. Until that happens, here is what is going on, why the letter matters, and what to do if one lands on your kitchen table.

What the Kwong decision said

The federal government declared COVID-19 a national disaster, and under the tax code a federally declared disaster can automatically postpone certain tax deadlines. For COVID, that postponement period ran from January 20, 2020 through July 10, 2023.

In Kwong v. United States, 179 Fed. Cl. 382 (2025), the Court of Federal Claims held that the two-year deadline for filing a tax refund lawsuit was automatically postponed during that disaster period. The taxpayer’s suit, filed in February 2023, was treated as timely.

The reasoning had much wider implications. If COVID postponed tax deadlines for nearly three and a half years, many taxpayers may have been charged penalties and interest, or held to deadlines, that should have been paused. Taxpayers across the country filed refund claims on Form 843 based on that reasoning. We wrote about the opportunity in Did You Pay a Tax Penalty During COVID? You May Be Due a Refund.

Why the IRS is denying the claims

A decision from the Court of Federal Claims binds the parties in that case. It does not require the IRS to apply the same reading to everyone else, and the IRS has not adopted it.

According to reporting in The Tax Adviser, taxpayers with Kwong-related claims are now receiving two kinds of letters.

  • Denial letters, which formally disallow the claim
  • “No consideration” letters, which decline to process the claim at all

National Taxpayer Advocate Erin Collins said the IRS has received more than 275,000 Forms 843 raising Kwong-related claims, which she described as “a small fraction” of the taxpayers who could have been affected.

The two-year clock most people miss

This is the part that matters most, and the part that is easiest to get wrong.

When the IRS formally disallows a refund claim, you generally have two years from the date of that notice to file a refund lawsuit in federal court. Collins reminded taxpayers that a formal notice of claim disallowance generally starts that two-year period, and that continued discussions with the IRS generally do not stop the clock.

That second point catches people. It is natural to assume that if you are writing back to the IRS, calling, or asking for reconsideration, your rights are on hold. Under the tax code, reconsidering a claim after it has been disallowed does not extend the deadline to sue. The period can generally be extended only by a written agreement signed by both you and the IRS.

Miss the two-year window and you may lose the right to challenge the denial in court, even if the courts later rule in favor of taxpayers on the underlying question.

The “no consideration” letters raise a harder question. It is not yet clear whether a letter refusing to process a claim starts the same clock as a formal denial. Until that is settled, the cautious approach is to treat any letter about your claim as potentially starting a deadline.

What the Taxpayer Advocate asked the IRS to do

The Taxpayer Advocate’s position is that the IRS should hold these claims until the courts resolve the legal questions, pointing to IRS guidance that generally supports delaying action on protective claims while related litigation is pending. She asked the IRS to

  1. Halt further denials of Kwong-related claims while litigation continues
  2. Identify taxpayers who have already received denial or no-consideration letters and review those determinations
  3. Take corrective action where appropriate
  4. Update its guidance and claim-screening criteria before issuing more letters

The IRS has not announced a response. The story is still developing, and the underlying legal questions remain unresolved.

What to do if you received a letter

Do not file it away, and do not assume it ends the matter. A few steps protect your options.

  1. Find the date. The date on the letter may be the starting point of your two-year window. Write it down and calendar the two-year mark.
  2. Identify the type of letter. A formal disallowance and a no-consideration letter may carry different consequences. The letter number and wording matter.
  3. Keep copies of everything. That includes the claim you filed, proof of when you filed it, and every letter from the IRS since.
  4. Do not rely on phone calls or correspondence to protect you. Ongoing conversations with the IRS generally do not pause the deadline.
  5. Get a professional review well before the deadline. Depending on your situation, options may include an administrative appeal, a written agreement extending the time to sue, or a refund suit. The right choice depends on the amount at stake and the facts of your claim.

If you never filed a claim and think you were charged penalties or interest during the COVID period, the analysis is different and depends on your specific deadlines. A tax professional can tell you whether any option remains open. If the IRS is also pursuing a balance from that period, our guide to first-time penalty abatement letters covers another route to relief.

Get your letter reviewed before the clock runs

A refund claim that was worth filing is worth protecting. If you received a denial or no-consideration letter on a COVID-era refund claim, the most important thing you can do right now is find out exactly what deadline applies to you.

Call IRS Trouble Solvers at (630) 832-6500 or schedule a risk-free case evaluation today, and bring the letter with you.

This article provides general educational information and is not legal or tax advice. Tax outcomes and available resolution options depend on each taxpayer’s individual facts and circumstances. This is a developing issue, and the IRS’s position or the courts’ rulings may change.

Frequently asked questions

Q: What is a Kwong claim?

A: It is a refund claim, usually filed on Form 843, that relies on the Court of Federal Claims decision in Kwong v. United States. That decision held that tax deadlines were automatically postponed during the COVID disaster period from January 20, 2020 through July 10, 2023.

Q: Is the IRS required to follow the Kwong decision?

A: Not for taxpayers outside that case. The IRS has not adopted the court’s reading and is issuing denial and no-consideration letters on claims based on it.

Q: How long do I have to sue after my refund claim is denied?

A: Generally two years from the date the IRS mails a formal notice of claim disallowance. Continued discussions with the IRS generally do not extend that period. It can generally be extended only by a written agreement with the IRS.

Q: Does a “no consideration” letter start the two-year clock?

A: That is not yet settled. Until it is, the safest approach is to treat the letter as potentially starting a deadline and have it reviewed promptly.

Q: How many people have filed these claims?

A: The National Taxpayer Advocate says the IRS has received more than 275,000 Forms 843 asserting Kwong-related claims, a small fraction of the taxpayers who may have been affected.

Q: Should I just wait to see what the courts decide?

A: Waiting can be risky if you have already received a disallowance letter, because the two-year period to sue may be running. Have a professional review the letter and your deadlines now, then decide.

Sources

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