Don't Leave Money on the Table - File Your Protective Refund Claim

A landmark case decided in November 2025 (Kwong vs. US), has changed the due date for returns and payment due during the COVID Pandemic to July 10, 2023.  The Statute of LImitations for filing Protective Refund Claims is July 10, 2026.  You don't want to miss out on your opportunity to receive a refund for penalties and interest previously assessed and/or paid.

Transcript

SPEAKER_00 0:05

Hi friends. Welcome to this episode of TIF Talks Tax. I'm your host, Tiffany Albright Rankin. In this conversation, we're going to be talking about the Kwong case. Kwong versus US. But before we start, let me tell you a little bit about myself, in case you were wondering. I'm a licensed CPA in the state of Ohio, and yes, I do bleed Scarlet and Gray. I am the privileged owner of a boutique firm in Central Ohio called the TLA Group, where we specialize in all things tax, tax compliance, tax planning, and tax consulting. Our fundamental goal at the firm is simple. We're here to help. One of the ways we can do that is by empowering you through these conversations. So let's talk. Okay. Hi, friends. We're back. We've missed you. We successfully made it through tax season. Um, slightly, slightly scathed, but overall pretty good. Um we hope you've missed listening to these conversations because I will tell you, through the last couple months, we have accumulated lots of things that we are going to be talking about. Uh, lots of requests from you as clients, which is fantastic. Um, so we took note of those things and we are going to be talking about them in upcoming conversations. But the one that we're going to be talking about today is very, very important and very time sensitive, which is why we are bringing it to you now. So this one is a little on the technical side. So I'm going to recommend that you get a pencil, piece of paper, and a pencil out to um jot things down, maybe draw a little picture or draw a little timeline as you're listening to this, because I apologize, but it is a little on the technical side. I I'm gonna do my best to make it as um user-friendly as possible. Uh, but in this instance, this one isn't overly user-friendly. So, but it is very powerful if it is something that applies to you. So I want, I want we wanted to get it out there because again, time is ticking. There's a due date in July that you have to comply with if you want to potentially benefit from this. So I don't want to keep you in suspense any further. Let's talk about what this is. What we are going to be talking about today is a Court of Federal Claims case called Kwang versus the US. And Kwang is spelled KW, in case you wanted to go out and you know look it up. This case was decided at the Court of Federal Claims on November 25th, I believe, of 2025. So at the end of November of 2025, the Court of Federal Claims found in favor of the taxpayer of Kwong. So at the moment, it found in favor of Kwong, which is favorable for the taxpayer, and which is why we are discussing it now, because it opens up the door to potentially be favorable to all of you. And so the Court of Federal Claims is a national court which deals with um financial questions against the federal government. So it is a very high-level court. Now, this case was just decided with the Court of Federal Claims in November of 2025. So, like in any court case, once a court decision is made, there is an ability for the opposing side to appeal the decision. The same holds true now for the federal government. So while this case did get decided in November of 2025, it's a landmark case. Um big deal. Uh there the appeal process has yet to begin for the federal government. So assuming that the government, the federal government, is going to appeal the decision in this case, we do have a while until this case is finally resolved. A final decision is made with this case. But what we are going to talk about today doesn't care about that. I mean, it doesn't care about that. What we care about in this case is the statute of limitations, what this case means, and what you need to do about it by the upcoming due date to get your place in line so you don't miss out on if this decision holds. So let's talk about what it is. What this is, Quang versus US, it's a landmark decision that basically says under code section 7508, capital A, subsection D, let me say that again. There is a mandatory extension for tax obligations during federally declared disaster periods plus 60 days. And so what the Kwan case is doing is arguing failure to file, failure federally failure to file and failure to pay penalties and interest during COVID. And I know we all want COVID. We're we're we every time we bring that back up, we you know we cringe a little bit. But it is it is front and center in this case. And so what the Kwang case is saying, which again the court found in favor of Quang, is that there in essence is no federal due date for returns or payments during a federally declared disaster period. So what that says is that any federal returns that were due to be filed or paid between January 20th of 2020 through May 11th of 2023 plus 60 days, which gets you to July 10th of 2023. To the extent there were federal returns, any federal returns. This is not just individual, this is not just business, all federal returns that were due between January 20th of 2020 and July 10th of 2023 are not were not considered due until July 10th of 2023. So that means the 2019 returns, the 20 returns, 21 and 22 returns. So give that a second to think about that. So if you are someone, whether on your in at the individual level or at the business level, filed or paid your taxes late during that period, this this case is for you, and the actions that needed to be taken are for you. Um sorry, I just lost my train of thought there. So so that so this is for you. And and what that is then saying is none of the due dates, all of the all of the due dates for those tax returns um have a new due date of July 10th of 2023. So now you're saying, okay, fine. I do I did have some of those, but I don't see the point here because we're in 2026. So July 10th of 2023 was almost three years ago. You're right. July 10th of 2023 was almost three years ago. The reason that this is so important is because with the IRS, the ability to claim refunds, make changes, get audited, any of those things relies on the statute of limitations. And the statute of limitations is for the most part three years from the due date. This landmark case in Quang says that the due date for all of those returns was July 10th of 2023. Three years from that puts us at July 10th of 2026, less than a month and a half away. So now you're thinking, hmm, okay, I see your point. What do we need to do? Okay, this does apply to me, and I did have a hefty penalty. This applies to me. What did we do? Okay, great. Here's what we need to do file a protective refund claim on Form 843. And what that does, it cements or memorializes your right to receive a refund of penalties and interest paid during that time period, or potentially lower what was assessed, um, once this case gets settled in the future. If you don't file the protective refund claim by July 10th of 2026, then you're gonna be out of luck. So while I previously said that this case is likely going to be appealed, I mean, I I I would assume that it is, assuming that this case is going to be appealed by the federal government, it will likely be years until the final decision is made. And so you might be thinking, well, why would I do that? Well, why would why would I take action now on July 10 by July 10th of 2026 for something that isn't going to happen for years or may never happen? That's an excellent question. And I and it's a valid question. But my point here is if you don't do anything, then five years from now or four years from now, when when you when this thing finally gets settled, you might be saying, shoot, I wish I would have done that because I shoot, I wish I would have done that, or I wish I would have known about it. Well, this is the conversation that is making you aware of it. So let's go back and now that you know, let's go back and kind of high-level talk through like some applicability and some examples. So let's say that you are someone that filed something late or paid something late for 1920, 21, or 22. Let's say that it is true you filed it late or paid it late from its original due date. As long as you got it done by July 10th of 2023, then it isn't late. So based on this case, you would be eligible to receive the full amount of penalty and interest back under the filing the protective refund claim on Form 843. I mean, that's a slam, that's a slam dunk. That's a slam dunk. Now, the more complicated piece is, and the one that is a little bit of a more aggressive position, I'm not saying it's wrong, it's just a little more aggressive. Um, it's a more liberal reading of the court case, is that if you are someone that has penalty and interest assessed against you, um assessed against you, well, let me step back from that. Let's not talk about the aggressive approach first. Let's talk about. So we we just mentioned that if you filed or paid something late but got it done regardless by July 10th of 2023, that's a slam dunk. Like it is technically not late under this court case. If you are someone that filed and paid late or are or have not have not yet paid all the way, so you do have penalties and interest associated with your 19, 20, 21, and 22 account, um, and you still have a balance due with the IRS for that period, it is not quite a slam dunk. So in this instance, your technical due date when penalties and interest should have been started to be starting to be computed was July 10th of 2023. So if you are someone who still has a balance due, the likelihood of being eligible to receive a refund for the penalty portion of it is probably low because the penalty, um, the the penalties assessed cap out at, I believe, after six months of being outstanding. I might be wrong on that, but but certainly three years. So if you are someone who has penalties associated with these, with these late filings, it is very likely that you won't have the ability to get the penalty portion of it back because it would have maxed out on the penalty calc somewhere between August of 2023 and now. Definitely worth considering. Or, or if you if you didn't get it paid in full by July 10th of 2023, but maybe you got it paid in full early in 24 or late in 23, still worth considering, not definitely a slam dunk, but the interest component of it, um definitely worth considering. So, again, still worth jotting down and talking to someone about. Now let's move into the more aggressive approach. Again, I'm not saying that it's wrong, but it's a it's a more liberal reading of the court case. And what this is saying is not only is the due date July 10th of 2023, to the extent you owed money after that, you didn't get it, you weren't fully compliant by July 10th of 2023, then the calculations for penalty and interest during this period, July or January 20th of 2020 through July 10th of 2023, also should halt. So for example, if you had payments or balances due from prior to January 20th of 2020, so maybe for 17, 18, 19, maybe not 19, 17, 18, previous years prior to this, then the computation of the the assessment and the accrual of the interest associated um and penalty, penalties and interest associated with that period should also halt between July 20th of 2020 and I'm sorry, January 20th of 2020 and July 10th of 2023. Now, again, that's a much more liberal reading of the case, but um the argument is made that that would also exist. So it is crucial that you consider if you are someone that are subject to any penalties and interests associated with your accounts through these periods and contact a tax professional, whether it be a CPA or a tax attorney, immediately to engage them to assist you with this protective refund claim. The other window that this opens up, I mean, this is so far-reaching, it's just a fascinating case, and that's why we say landmark, is the ability to get a clean slate for the failure, the first-time abatement penalties for failure to file or failure to pay. We don't have time in this conversation to talk about what the failure or the first-time abatement, the FTA um request is. It is a very powerful and underutilized provision in the code. But if you are someone that has a failure to file or failure to pay penalty associated with your 23, 24, or 25 account, and you weren't able to get FTA first-time abatement treatment on those years because you didn't have an air quote clean filing history for um 1920, 21, or 22. Well, as long as you got things filed by July 10th of 2023, your previously unclean filing and payment history is now marked, is now wiped clean. You have a clean history. As long as you got 1920, 21, and 22 filed and paid by July 10th of 2023, you have a clean filing history and the FTA is back on the table for 23, 24, and 25 for you. Again, huge benefit if it if this is something, if you're someone that has been afflicted by this, definitely consider looking at that and filing an FTA first-time abatement request. It's a slam dunk. The IRS has to give it to you if you have a prior clean history. And so maybe you're saying, well, I don't really know if I if I did have these penalties or interest. And you might not, or maybe you don't remember because all of us like to have tried to, you know, forget COVID, right? So what would be very beneficial for you here is if you already have an IRS account, maybe you've already had one, or maybe you got one because you went and you paid your taxes online at irs.gov this year. Maybe you did that. You listened to one of our conversations and you followed our instructions. Either way, if you get if you have or you get an IRS account, you can log into that and go pull your account transcripts for 19, 20, 21, and 22. It will tell you line by line on there if you have penalties and interest associated with your account. Go take a look. Um, and if you do, engage a professional to help you file the protective refund claim. Um, and honestly, the person who's gonna prepare prepare the Form 843 for you, they're gonna want that account transcript anyway, because you have to be specific on the dollar amount that you are requesting for. So they're gonna want that account transcript anyway. So go ahead and pull that, get that done. So I'll leave you with this. What you might be saying is so you're telling me you want us to engage a professional and pay a fee for something right now that we aren't gonna get, you know, until four or five or more years from now, if we get it at all, we might be paying for something that we aren't gonna get for a long time, or we may never get it. And my answer to you is yes, that is exactly what I'm saying. But I'm telling you here, I would hate for you to miss out on the opportunity to get that money back because you simply did not file the protective refund claim on Form 843. And if you're considering doing this, I would also suggest um that you do not. Wait long to engage a professional to help you analyze and file this protective refund claim because we have less than a month and a half to do these. And um if you go to someone on July 4th, they're not gonna likely get this done for you. Um, because the timing of this, not that it should matter, but in practical application, and since I'm a very transparent person, it does matter. All of us in this profession have come off a hellacious tax season. And so right now we are trying to not work that much. I mean, we're still working, but we're taking vacations, we're finishing up the school year, we're having college and high school graduations, we're doing home improvements, we're doing personal things where we might not be as available to get things done as we did during tax season. Um, so we are asking, I'm asking all of you listeners, on behalf of all of us in our profession, take a look at what you have going on. And if you think that this is something you can benefit from, please contact your professional immediately to talk to them about filing this refund claim for you. So, okay, friends, that was a thick conversation, and I know that that was a lot to start off with after being on a hiatus for a couple months. But again, we live and die by the due dates, and this is a good one coming up. So I hope you thank you for tuning in. I hope you enjoyed the conversation, and I hope that you have a great start to your week. Take care. Bye.