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Tax Court Pushes Back On Some Kwong-Related COVID Penalty Claims
BETA This is a BETA experience. opt-out here Money Taxes Editors' Pick Tax Court Pushes Back On Some Kwong-Related COVID Penalty Claims In Bowen v. Commissioner, the Tax Court made a distinction between time-based penalties and accuracy-related penalties. That distinction may matter for COVID-era penalty claims. By Kelly Phillips Erb ,
A recent U.S. Tax Court order is causing a stir, with some practitioners suggesting it could significantly limit taxpayers’ ability to recover penalties and interest assessed during the COVID-19 pandemic. But the fallout may not be quite that simple.
In Bowen v. Commissioner, the court did not decide whether federal tax deadlines were automatically postponed during the COVID-19 disaster period. Instead, it assumed that they might have been—and ruled that the extension would not wipe out the accuracy-related penalties at issue.
The taxpayers, Suzanne and Kenton Bowen, filed a petition in Tax Court in 2024 after the IRS assessed additional tax for 2016 along with a 20% accuracy-related penalty, alleging that the return reflected negligence or disregard of the tax rules.
A notice of deficiency sets out the IRS's determination that the taxpayer owes additional tax and often includes any proposed penalties. After the notice is mailed, the taxpayer generally has 90 days (150 days if addressed outside the United States) to file a petition with the U.S. Tax Court. Filing a timely petition allows the taxpayer to have the dispute heard by the Tax Court before paying the proposed deficiency—which is what happened here.
Suzanne Bowen was later dismissed from the case for lack of jurisdiction. The IRS had moved to dismiss her on the grounds that it had not issued a notice of deficiency—or made another determination concerning her 2016 tax year—that would allow her to invoke the Tax Court’s jurisdiction.
That left Kenton Bowen as the petitioner in the original case (the case is part of a group of four related cases involving Bowen). Three of the notices of deficiency included accuracy-related penalties. In the fourth case, the IRS added the penalty by amending its answer. The cases have generated several orders, but only one directly addresses the taxpayers’ COVID-19 relief argument.
On July 17, 2026, the petitioners filed a motion asking for permission to amend the petition. They wanted to add an argument that they were not liable for penalties and interest assessed during the COVID-19 disaster period. Their theory relied principally on two cases: Abdo v. Commissioner and Kwong v. United States.
In Abdo, decided in 2024, the Tax Court concluded that the mandatory disaster relief provision then found in section 7508A(d) of the tax code applied an automatic postponement period, making the taxpayers’ petition timely.
Then, in Kwong , the U.S. Court of Federal Claims concluded that the mandatory postponement period associated with the COVID disaster ran from January 20, 2020, through July 10, 2023—60 days after the disaster period ended. Anticipating a flood of protective refund claims, the IRS opened a portal to make it easier to handle them.
Congress later amended section 7508A on November 15, 2021, changing the formula for disaster-related postponements going forward. The amended version generally results in much shorter postponement periods. But in Kwong, Judge Meyers ruled that the 2021 change did not apply retroactively to the COVID-19 disaster period because the pandemic disaster declaration began before the law was changed. The government has appealed Kwong.
The taxpayers in Bowen sought to use those decisions to challenge section 6662 accuracy-related penalties and interest connected to the COVID-19 period.
Judge Ronald L. Buch didn’t agree, denying their motion. But it wasn’t a wholesale no to Kwong and Abdo. Instead, the Tax Court held that a taxpayer could not use a pandemic-related deadline extension to avoid an accuracy-related penalty. The court also declined to consider the taxpayer’s challenge to interest but for jurisdictional reasons, not because it ruled that pandemic relief could never apply to interest.
The motion failed for other reasons—notably ,it was flawed since the taxpayers did not attach the proposed amended petition. Judge Buch wrote that the court could have denied the motion on that basis. But he nevertheless considered whether the amendment would be futile anyway (courts may deny permission to amend when the proposed new claim would fail even if it had been properly pleaded).
Judge Buch turned to the statute, writing: “More simply stated, section 7508A extends deadlines.”
But extending deadlines doesn't necessarily eliminate all penalties. Judge Buch concluded that even if section 7508A extended a relevant deadline, the extension would have no effect on the accuracy-related penalties at issue in the case.
The court distinguished accuracy-related penalties from liabilities that depend on timing. A failure-to-file penalty, for example, is generally triggered by a taxpayer’s failure to file a return by its due date. A failure-to-pay penalty generally depends on whether the taxpayer paid by the required date. Those are deadline-based penalties. Extending or disregarding a period of time can directly affect whether they apply.
An accuracy-related penalty is different. Giving a taxpayer additional time to file does not ordinarily change whether the return understates tax or contains a negligent reporting position.
Section 6662 penalties—those at issue in Bowen—generally impose a penalty equal to 20% of the portion of an underpayment attributable to specified conduct, including negligence, disregard of rules or regulations, substantial understatements of income tax and certain valuation misstatements. Those penalties are tied to an underpayment, not merely to a missed deadline.
The petitioners also sought to challenge the interest assessed during the alleged COVID-19 postponement period. But the Tax Court did not decide whet...
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