Form 843, the Penalty-Abatement Narrative, and Protective Claims After Kwong
IRS penalties and interest can become a major part of a tax controversy. In many cases, the underlying tax is only one part of the problem. A taxpayer may also face failure-to-file penalties, failure-to-pay penalties, deposit penalties, accuracy-related penalties, estimated tax penalties, or interest that continues to grow while the dispute is pending.
Form 843, Claim for Refund and Request for Abatement, is one of the principal tools taxpayers use to request a refund or abatement of certain penalties, additions to tax, interest, fees, or other amounts. But Form 843 is not just a form. The form itself is only the cover page. The substance of the request is usually the narrative: the factual chronology, legal basis, supporting documents, and explanation of why the IRS should remove or refund the amount at issue.
That narrative has become especially important in light of recent developments involving IRC § 7508A, the COVID-19 federal disaster period, and protective refund claims based on Abdo v. Commissioner and Kwong v. United States.
What Form 843 Does
Form 843 is used to request a refund or abatement of certain amounts. It is commonly used for penalty abatement, certain interest abatement claims, and refund claims involving penalties or other non-income-tax items.
It is not a substitute for every amended return. If the taxpayer is changing income, deductions, credits, filing status, or the amount of income tax shown on a previously filed individual return, Form 1040-X may be the correct form. But when the taxpayer is seeking abatement or refund of penalties or certain interest, Form 843 is often the procedural vehicle.
The IRS itself states that taxpayers should use Form 843 to claim a refund for other taxes, not income taxes, and penalties. For reasonable-cause penalty relief, the IRS also states that if relief cannot be granted by phone, the taxpayer may request relief in writing with Form 843.
That means Form 843 is often used in two related but distinct ways. First, it may be used to ask the IRS to abate an assessed but unpaid penalty. Second, it may be used to claim a refund of a penalty or related interest that has already been paid.
The Narrative Is Usually the Case
A short Form 843 with a one-sentence explanation is often not enough. The taxpayer should treat the submission as an advocacy document.
The narrative should be organized, chronological, and specific. It should not merely state that the taxpayer acted in good faith. It should show the facts that support that conclusion.
For ordinary reasonable-cause requests, the IRS asks taxpayers to explain what happened, when it happened, how the situation prevented timely filing or payment, and what attempts the taxpayer made to comply. The IRS also recommends supporting documents such as medical records, disaster documentation, correspondence, receipts, forms, or other relevant records.
Reasonable Cause Versus Legal Error
Form 843 requests usually fall into two broad categories.
The first category is reasonable cause. The taxpayer is not necessarily saying the IRS lacked legal authority to assess the penalty. Instead, the taxpayer is saying the penalty should be removed because the taxpayer exercised ordinary business care and prudence but was unable to comply.
Examples may include serious illness, death, unavoidable absence, inability to obtain records, casualty loss, natural disaster, or other circumstances outside the taxpayer’s control.
The second category is legal error. The taxpayer is saying the amount should not have been assessed or retained because the law did not authorize it. This is different from reasonable cause. It is not a plea for discretion. It is a legal claim that the penalty, interest, or other amount is not legally due.
The Kwong and Abdo protective-claim issue belongs primarily in the second category. The argument is not simply that the taxpayer had good cause during COVID. The argument is that IRC § 7508A may have automatically postponed certain tax deadlines during the COVID-19 disaster period, and if those deadlines were postponed, certain penalties and related interest may have been assessed or retained improperly.
Why Abdo Matters
In Abdo v. Commissioner, the Tax Court addressed IRC § 7508A(d), the disaster-postponement provision. The taxpayers had filed a Tax Court petition after the ordinary deadline, and the IRS argued that the petition was late.
The Tax Court held that the version of § 7508A(d) then in effect provided an automatic, mandatory postponement period for a qualified taxpayer affected by a federally declared disaster. The court concluded that the statute unambiguously provided for a mandatory postponement and invalidated Treasury regulations to the extent they limited that automatic postponement.
For practitioners, Abdo mattered because it treated § 7508A(d) as self-executing. The case was not only about one Tax Court petition. It opened broader questions about whether certain tax deadlines during the COVID-19 disaster period may have been automatically postponed even where IRS administrative guidance did not provide that full relief.
Why Kwong Matters
Kwong v. United States took the issue further. The Court of Federal Claims addressed the outer limits of the COVID-19 disaster postponement period. The taxpayer argued that the COVID-19 disaster period began January 20, 2020, and extended through May 11, 2023, with an additional 60 days under the statutory language.
The Court of Federal Claims accepted the broader taxpayer-favorable reading. Under that view, the relevant mandatory postponement period extended through July 10, 2023.
If that view ultimately prevails, it could have significant refund and abatement consequences. Penalties and interest assessed for certain filing and payment deadlines falling within the covered disaster period may be subject to refund or abatement. Refund-claim deadlines themselves may also be affected.
That is why taxpayers and advisors are now reviewing account transcripts for COVID-era penalties and interest.
The IRS Has Not Fully Accepted the Broad Kwong Theory
Taxpayers should not assume that the IRS is voluntarily granting all Kwong-based claims. The issue remains contested.
Current reporting indicates that the IRS has taken a narrow position in response to Abdo, acquiescing only to the result that the COVID-19 disaster declarations created a mandatory postponement period from January 20, 2020, to March 20, 2020. The IRS has not accepted the broader interpretation that would extend the mandatory postponement through July 10, 2023.
The same reporting indicates that DOJ filed a notice of appeal in Kwong on May 15, 2026. That means taxpayers should treat Kwong as an important opportunity to preserve rights, but not as final settled law.
This is exactly the setting where protective claims matter.
What Is a Protective Claim?
A protective claim is a claim filed before all facts or legal issues are fully resolved, usually to preserve the taxpayer’s right to a refund before the statute of limitations expires. It alerts the IRS that the taxpayer is claiming a refund or abatement if a pending legal issue is ultimately resolved favorably.
A protective claim does not always require the taxpayer to calculate the exact refund amount. But it must provide enough information to identify the taxpayer, the periods involved, the legal basis for the claim, and the nature of the relief requested.
For Kwong-related claims, the National Taxpayer Advocate has stated that taxpayers will generally need to file Form 843, write “Protective Refund Claim Pursuant to Kwong Case” or similar language across the top, and include as much detail as possible. In most cases, taxpayers should file a separate Form 843 for each tax period and each type of tax.
Why July 10, 2026 Matters
The July 10, 2026 date is being treated as a key protective-filing deadline for many potential Kwong-related claims. The logic is that if the COVID-19 disaster postponement period ran through July 10, 2023, then certain refund-claim periods that were postponed may expire three years later, on July 10, 2026.
Taxpayers should not wait for the appellate process to finish. If the taxpayer waits until the law is finally settled, the refund claim period may already be closed.
The protective claim allows the taxpayer to preserve the issue while Kwong and related § 7508A questions continue to develop.
Protective Claims Are Not Only for Paid Amounts
Some taxpayers have already paid COVID-era penalties and interest. For those taxpayers, the Form 843 may be a protective refund claim.
Other taxpayers may still have assessed but unpaid penalties and interest. In those cases, the taxpayer may seek abatement. The National Taxpayer Advocate has noted that taxpayers can file protective claims for abatement of interest and penalties assessed but not yet paid.
That distinction matters. A refund claim seeks money back. An abatement request asks the IRS to remove an amount from the account. Some taxpayers may need both.
Interest Requires Special Care
Interest is harder to abate than penalties. The IRS’s own Internal Revenue Manual states that reasonable cause is never the basis for abating interest. Interest abatement must be based on statutory authority, such as IRS error or delay, an illegal or erroneous assessment, or another specific provision.
That makes the Kwong theory important. A taxpayer relying on Kwong is not simply asking the IRS to waive interest for fairness. The taxpayer is arguing that, if the statutory postponement applied, the interest was not legally due for the affected period or on the affected penalty amount.
The narrative should be precise. It should not ask the IRS to abate interest merely for reasonable cause if the theory is actually that the interest was unlawfully assessed because the underlying deadline was postponed.
Transcript Review Is Critical
Before filing, taxpayers should obtain and review IRS account transcripts. A transcript can identify:
The original filing date.
The return due date.
Payments and payment dates.
Failure-to-file penalties.
Failure-to-pay penalties.
Estimated tax penalties.
Interest assessments.
Penalty abatements already posted.
Refunds already issued.
Collection activity.
Transcript review helps determine whether a protective claim is worth filing, what years are involved, and whether the claim should seek refund, abatement, or both.
For practitioners, transcript review also helps avoid filing overbroad or unsupported claims. A targeted protective claim is usually stronger than a generic filing that fails to identify the affected periods and amounts.
The Practical Takeaway
Form 843 is a procedural tool, but the narrative is the substance of the claim. For ordinary penalty abatement, the narrative should prove reasonable cause with a detailed chronology and documents. For Kwong-based protective claims, the narrative should identify the legal issue, the affected periods, the penalties and interest at issue, and the taxpayer’s intent to preserve refund or abatement rights while the law remains unsettled.
Taxpayers who paid or were assessed federal penalties or interest tied to deadlines during the COVID-19 disaster period should consider prompt transcript review. Because the Kwong issue remains contested, the filing may need to be protective rather than final. But waiting for final appellate resolution may mean missing the refund-claim deadline.
The Karam Firm, PLLC advises individuals, businesses, trusts, estates, and tax professionals on Form 843 penalty abatement requests, protective refund claims, IRS notices, penalty and interest disputes, reasonable cause narratives, COVID-era disaster relief claims, and federal tax controversy strategy. If you paid or were assessed IRS penalties or interest during the COVID-19 disaster period, or if you need help preparing a protective Form 843 claim, contact The Karam Firm for additional information.
This article is for general informational purposes only and does not constitute legal or tax advice. Reading this article or contacting the firm does not create an attorney-client relationship. Refund and abatement rights depend on the taxpayer’s specific facts, transcripts, payment dates, tax periods, notices, and applicable law.
