IRS urged by national taxpayer advocate to pause Kwong claims denials

Taxpayers who filed claims tied to ongoing Kwong litigation stemming from COVID-19 disaster relief are receiving IRS denial and “no consideration” letters, prompting the national taxpayer advocate (NTA) to urge the agency to halt further denials while courts continue to consider the case.

“I am particularly concerned that the IRS is sending letters to some taxpayers declining to process or disallowing their Kwong-related claims based on criteria that may not adequately account for the legal issues still being litigated,” NTA Erin Collins wrote in a blog post Tuesday.

The IRS has received more than 275,000 Forms 843, Claim for Refund and Request for Abatement, asserting Kwong-related claims, Collins said. She noted that the figure represents a small fraction of the tens of millions of taxpayers who could have been affected by the litigation.

As taxpayers begin receiving denial and “no consideration” letters, Collins said they should take the correspondence seriously but also should not abandon their claims. “If you received one of these letters, do not ignore it, but don’t assume it necessarily ends the matter either,” she wrote.

Collins said she has asked the IRS to identify taxpayers who received the letters, review the determinations, and take corrective action where appropriate.

In Kwong, 179 Fed. Cl. 382 (2025), the Court of Federal Claims held that the two-year deadline in Sec. 6532(a)(1) for filing a refund lawsuit was automatically postponed under Sec. 7508A(d) during the COVID-19 disaster period. The court concluded that the postponement period began Jan. 20, 2020, and ended July 10, 2023, making taxpayer Terry Kwong’s lawsuit, filed Feb. 23, 2023, timely.

Collins previously urged potentially affected taxpayers to file refund or protective claims, noting that many taxpayers needed to act by July 10, 2026, to preserve claims under the court’s interpretation of the law.

The better approach would be for the IRS to hold claims until courts have resolved the underlying legal questions, Collins wrote. She pointed to Internal Revenue Manual guidance that generally supports delaying action on protective claims while related litigation is pending.

Holding the claims would help protect taxpayer rights, reduce confusion, and avoid unnecessary litigation, Collins wrote. She also urged the IRS to review and update its guidance and claim-screening criteria before issuing additional Kwong-related denial or no-consideration letters.

Collins also expressed concern that taxpayers may misinterpret the letters and either abandon potentially valid claims or conclude that they must immediately file suit to preserve their rights. She reminded taxpayers that a formal notice of claim disallowance generally starts a two-year period for filing a refund lawsuit and that continued discussions with the IRS generally do not stop that clock.

“Taxpayers who took timely steps to preserve their rights should not be placed at risk of losing those rights because the IRS prematurely denied or declined to process their claims while the controlling legal questions remain unresolved,” she wrote.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.