The tax implications of the pandemic are still unfolding. If you paid significant IRS interest or penalties between early 2020 and mid-2023, recent federal court rulings have opened a potential window to recover those funds.
While this presents a promising opportunity for many taxpayers, the legal landscape surrounding these refunds remains fluid and complex. We want to break down exactly what these developments mean, who stands to benefit, and how Sorren is proactively stepping up to protect your financial interests.
What Changed in the Courts?
Two landmark tax cases—Kwong v. United States (2025) and Abdo v. Commissioner (2024)—recently challenged how the IRS handled deadlines during the pandemic.
The courts suggested that the IRS was legally required to pause specific tax deadlines during the federally declared COVID-19 national disaster period. This official disaster period ran from January 20, 2020, through July 10, 2023.
If these court decisions hold up against expected appeals, the implications are highly favorable for taxpayers:
- Interest and certain penalties (like late filing or late payment fees) should not have accrued during this time.
- Taxpayers who paid these accrued amounts may be fully eligible for a refund.
Why This Matters for Your Finances
Taxpayers who incurred meaningful interest or penalties tied to this specific timeframe might have a rare opportunity to recover those costs. This is particularly relevant for tax years where the statutes of limitations remain open, or for penalties paid within the last two years.
Instead of accepting these past penalties as a sunk cost, businesses and individuals now have a legal precedent to challenge them. However, successfully navigating the IRS refund process requires strategic timing and careful analysis.
Navigating the Uncertainty
We believe in providing clear, actionable advice, which means addressing the hurdles ahead. This remains an actively evolving area of tax law, and you should approach it with a clear understanding of the current landscape.
The IRS Will Likely Appeal
The government will almost certainly appeal the Kwong decision. Because of this, the IRS will not proactively grant refunds or approve existing claims while the issue remains unresolved in the higher courts.
Weighing the Costs and Benefits
Analyzing your past filings and pursuing a formal claim requires dedicated time and technical expertise. Because professional fees apply to this work, we recommend evaluating the cost against your potential recovery.
Generally, pursuing this refund makes financial sense if:
- Your total interest and penalties are substantial (typically $5,000 or more).
- The underlying facts of your specific tax situation strongly support a viable claim.
For smaller penalty amounts, the professional costs of pursuing the refund will likely outweigh the potential financial benefit.
How Sorren is Advocating for You
You do not need to navigate this uncertainty alone. At Sorren, we are already taking proactive steps to identify how these rulings impact our clients.
Right now, our team is carefully data-mining our client base to pinpoint specific situations where this refund opportunity applies. We believe in looking ahead and securing your financial well-being before deadlines pass.
Following the April 15 filing deadline, we will proactively reach out to impacted clients. Together, we will evaluate your specific situation and determine whether filing a protective refund claim is the smartest move for your financial strategy.
Bottom Line
You may have a time-sensitive opportunity to recover certain COVID-period interest and penalties. While the legal landscape is still developing and an IRS appeal is expected, the potential savings for heavily penalized taxpayers are substantial.
Sorren will continue to monitor these court developments closely. We will provide timely updates as the IRS issues additional guidance, ensuring you always have the most accurate information to make sound financial decisions.
Disclaimer: This communication is for informational purposes only and should not be construed as tax advice. Each taxpayer’s situation is unique and should be evaluated individually by a qualified professional.
