Pandemic Statute Relief Considerations

Recent court decisions, including Kwong v. United States and Abdo v. Commissioner, support the position that certain federal income, employment, and excise tax deadlines falling between January 20, 2020, and July 10, 2023 (the “Disaster Period”), were postponed because of COVID-19-related disaster declarations. This means that certain assessments of penalties or interest arising from late payments, deposits, or filings with due dates falling during the Disaster Period were potentially erroneous and should be abated.

The Kwong and Abdo cases may also affect limitations periods for filing refund or credit claims and refund suits. For many taxpayers whose refund-claim limitations periods began, ended, or otherwise ran during the Disaster Period, July 10, 2026, may be a key claim deadline because of tolling.

This development is particularly relevant for employers with pandemic-era employment tax adjustments. In some cases, taxpayers may still have time to act even if original deadlines appeared to have passed.

Key Actions for Employers

• Review penalties and interest attributable to tax filing, payment, deposit, or other time-sensitive obligations with due dates, computation periods, or accrual periods falling between January 20, 2020, and July 10, 2023.

• Identify opportunities to file refund or penalty abatement claims before July 10, 2026.

• Coordinate with advisors to ensure positions are properly supported.

Ryan’s Perspective

Employers are often assessed penalties and interest for late payments or deposits in the ordinary course of payroll operations, especially when deposit amounts do not match Form 941 Schedule B liabilities. Between 2020 and 2023, employers faced new challenges that included repaying Social Security deferrals, claiming or attempting to claim the Employee Retention Credit (ERC), and using unpaid ERC amounts to offset other payroll taxes due (e.g., the Social Security deferral). In some cases, this resulted in penalties and interest being assessed. Under Kwong and Abdo, such penalties (among others) assessed between January 20, 2020, and July 10, 2023, may have been improperly assessed or computed.

The government is expected to appeal the Kwong decision, and it is not yet clear how the Internal Revenue Service (IRS) will respond to abatement or refund claims based on these cases. Accordingly, taxpayers should expect full resolution of this issue to take time.

Ryan brings deep expertise in identifying and securing abatement of erroneous penalties and interest ahead of the July 10, 2026 deadline, helping ensure no opportunity is overlooked. Given uncertainty around how the IRS may respond to these claims, Ryan’s team of IRS process and procedure specialists is well positioned to defend and advance client interests―whether through appealing disallowed claims or strategically keeping claims open as court developments continue to unfold.

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals.