A protective claim for refund is a formal filing that preserves your right to an IRS refund while a legal question is still being decided in court. It doesn’t get you paid now — it stops the statute of limitations from expiring so you can get paid later if the courts rule in taxpayers’ favor. The tool matters right now because of Kwong v. United States, the Court of Federal Claims decision on COVID-era penalties that the government has appealed.
Here is the honest picture as of July 2026: the widely publicized July 10, 2026 window tied to Kwong has passed for many taxpayers, but protective claims are not a one-deadline tool. Your personal deadline depends on when you filed and when you paid — so some taxpayers still have time.
What Did the Kwong Decision Actually Say?
In Kwong v. United States (decided November 25, 2025), the U.S. Court of Federal Claims held that the COVID-19 federal disaster declaration triggered an automatic suspension of certain filing and payment deadlines under the pre-2025 version of Internal Revenue Code section 7508A(d), running from January 20, 2020 through July 10, 2023.
If that reading survives appeal, penalties and interest the IRS charged for "late" filing or payment during that window may not have been legally owed — making them refundable. The government has appealed, and the IRS is not issuing refunds automatically while the case is pending. We covered the background in COVID Penalty Refund Claims: Why the IRS Hasn’t Paid Yet and what the July 10 date meant in The IRS’s July 10 COVID-Era Refund Deadline Has Passed.
What Is a Protective Claim and Why File One?
A refund claim normally must be filed within three years of filing the return or two years of paying the tax, whichever is later. If you wait for the appeal to resolve, your window may close. A protective claim locks in your place in line before it does.
The IRS accepts protective claims when your right to a refund depends on a future event — like pending litigation. Key features:
- It can be filed on Form 1040-X (or Form 843 for standalone penalty/interest claims), clearly marked as a protective claim.
- It must identify the contingency (here: the outcome of the Kwong appeal), describe the tax years and amounts, and be signed.
- The IRS typically holds it open rather than processing it, then acts once the contingency resolves.
- Filing one costs nothing but postage or e-filing effort.
Who Might Still Benefit From Filing?
You are a candidate if all of these apply:
- You paid IRS penalties or interest (late filing, late payment) for tax years touching the January 20, 2020 – July 10, 2023 window.
- Your two-year-from-payment clock has not expired. Payments made after July 2024 — for example, if you settled a 2020 or 2021 liability late — may still be within the window.
- You have records showing what you paid and when (IRS account transcripts show this — request them free at irs.gov/transcripts).
If your last relevant payment was more than two years ago and your return was filed more than three years ago, the window has likely closed. A tax professional can confirm which clock applies to your facts.
How Do You File a Protective Claim, Step by Step?
- Pull your account transcript for each affected year to identify penalty and interest amounts and payment dates.
- Prepare Form 1040-X or Form 843 for each year, writing "PROTECTIVE CLAIM" at the top.
- State the contingency: that the claim is based on IRC section 7508A(d) as interpreted in Kwong v. United States, currently on appeal.
- List the amounts of penalties and interest paid, or state that amounts will be determined when the contingency resolves.
- Sign and mail to the service center where you file, keeping certified-mail proof.
What Happens After the Appeal Is Decided?
If the appellate court affirms Kwong, the IRS would then process held protective claims — though further guidance, or even legislation, could shape how broadly relief applies. If the decision is reversed, protective claims tied to it will be denied and nothing further is owed to you. Either way, you have lost nothing by preserving the claim.
FAQ
Is this the same as the $1,400 stimulus or other refund rumors?
No. This involves penalties and interest you actually paid. If you paid none during the window, Kwong offers you nothing. For rumor-checking, see Fourth Stimulus Check in 2026: What the IRS Actually Says.
Can the IRS reject a protective claim as too vague?
Yes, if it doesn’t identify the years, the contingency, or isn’t signed. The IRS has said a valid protective claim need not state an exact dollar amount, but it must be specific about the legal basis.
Should I amend my return instead?
A regular amended return asks for immediate processing and would likely be denied while the appeal is pending, forcing an appeal of the denial. The protective claim’s purpose is precisely to wait out the litigation.
Where can I verify the rules myself?
The National Taxpayer Advocate published a detailed explainer on the Kwong issue at taxpayeradvocate.irs.gov.