Imagine you spent two years fighting the IRS over a deficiency notice, finally settled, wrote a check that included thousands of dollars in interest, and closed the file for good. Now imagine a court telling you that some of that interest should never have been charged in the first place — and that you might still have a legal path to get it back, even though your case is over.
That's exactly the situation the U.S. Tax Court is wrestling with right now in Wepplo v. Commissioner, a case that could reopen the books on interest charged during the COVID-19 pandemic for taxpayers who thought their disputes with the IRS were long settled.
The Backstory: A Disaster Declaration Nobody Read the Fine Print On
On January 20, 2020, President Trump declared COVID-19 a nationwide emergency. Buried in the tax code is a provision, Internal Revenue Code Section 7508A(d), that automatically kicks in whenever the President makes a disaster declaration like that one. In its pre-2021 form, the statute said that during a "federally declared disaster," certain tax deadlines "shall be disregarded" for the length of the disaster period plus 60 days.
The IRS, understandably overwhelmed, issued its own notices postponing specific deadlines — tax filing dates, payment dates — but capped the relief well short of the full disaster window. For years, almost nobody questioned whether the IRS had the authority to do that.
Then two court decisions changed the picture entirely.
Abdo v. Commissioner Opens the Door
In Abdo v. Commissioner, 162 T.C. 148 (2024), the Tax Court looked at a married couple who mailed their Tax Court petition a couple of weeks after the normal 90-day deadline. Instead of dismissing the case, the court held that Section 7508A(d)'s pre-2021 language created a mandatory, self-executing postponement — one the IRS couldn't narrow by regulation. The Treasury regulation that tried to limit the relief to only the specific acts the IRS chose to postpone was invalidated to that extent. Abdo settled quietly in late 2024 without an appeal, but the reasoning didn't stay quiet for long.
Kwong v. United States Turns a Filing Rule Into a Refund Opportunity
In 2025, the Court of Federal Claims took Abdo's logic and ran with it. In Kwong v. United States, 179 Fed. Cl. 382 (2025), the court held that the entire COVID-19 disaster period — January 20, 2020, through May 11, 2023, plus a 60-day tail, landing on July 10, 2023 — had to be disregarded for all federal tax deadlines nationwide, not just the ones the IRS chose to postpone. Practically speaking, that meant many payments and filings the IRS treated as "late" during that 3.5-year window may not have been late at all, which in turn means the failure-to-file and failure-to-pay penalties — and the interest that piled up on top of them — may have been assessed without legal authority.
The IRS has appealed Kwong. In the meantime, tax advisors nationwide raced to file protective refund claims ahead of a hard July 10, 2026 deadline (tied to the standard limitations period for refund claims), just to preserve taxpayers' rights while the appeal plays out. If you run a small business and haven't heard about this from your accountant, it's worth asking whether that deadline applied to you and whether a claim was filed — the statute-of-limitations math is fact-specific, so "the deadline passed" isn't automatically the end of the story for every account.
Enter Wepplo: A Second, Separate Path That's Still Open
Here's where it gets interesting for anyone who has ever taken a dispute to the U.S. Tax Court.
The Wepplos had an ordinary deficiency case covering tax years 2015 through 2017. Like most Tax Court cases, it settled before trial — the parties agreed on the numbers, and the court entered a decision on May 12, 2025. The Wepplos paid the assessed deficiencies plus interest and, by all appearances, the matter was closed.
Except it wasn't. Tax Court Rule 261, paired with IRC Section 7481(c), gives taxpayers up to one year after a decision becomes final to file a motion asking the court to redetermine the interest on that deficiency. The Wepplos used that window to argue two things:
- The big constitutional argument: relying directly on Abdo and Kwong, they argued that Section 7508A(d) created a mandatory postponement running from January 20, 2020 to July 10, 2023, and that the IRS simply cannot charge interest on their 2015–2017 deficiency for any part of that stretch.
- The fallback argument: even setting the disaster-relief theory aside, they claimed the IRS had flat-out miscalculated the underpayment and overpayment interest for 2015 and 2016 under Section 6621's federal rate tables — to the tune of roughly $9,772.66 and $9,182.29 in net overcharges.
The Tax Court hasn't ruled on the merits yet. What it did do, in a July 2, 2026 order, is treat the case as a big deal: it invited amicus briefs, waived normal page limits, extended the briefing schedule to August 28, 2026, and scheduled oral argument. The court's own words were that the question "appears to affect a potentially very large number of taxpayers and may be of some importance to the tax system." Translation: this isn't a fringe theory anymore, and a decision either way is likely to set the template for thousands of similar disputes.
Why This Matters Even If You Never Heard of Section 7508A
Here's the part that should catch a small business owner's attention: the Wepplo path doesn't depend on the July 10, 2026 protective-claim deadline at all.
If you're an ordinary taxpayer who paid a tax bill outside of Tax Court, your refund clock generally runs from when you filed your return or paid the tax — which is why the rush to file protective claims by July 10, 2026 mattered so much. But if your dispute went through the Tax Court — even a routine, uncontested-once-you-saw-the-numbers deficiency case — Rule 261 gives you a full year from the date your decision becomes final, regardless of when that happens to fall relative to any refund-claim calendar. A small business owner who settled a Tax Court case in, say, March 2026 could still have well into 2027 to raise this argument.
That's a meaningfully different — and in some ways more forgiving — deadline than the one everyone's been racing against.
What to Check If You've Ever Been Through a Tax Court Deficiency Case
You don't need to be running a Fortune 500 finance department to be affected by this. Plenty of small business owners end up in Tax Court over disputed deductions, reclassified income, or payroll tax assessments. If any of the following apply to you, it's worth a conversation with your CPA or tax attorney:
- You had a Tax Court decision (of any kind — settled or litigated) within the last year. Rule 261's one-year clock may still be running.
- You had any unpaid federal tax balance — for any year — that existed at some point between January 20, 2020 and July 10, 2023. Interest that accrued during that window is the part now in dispute.
- You paid interest as part of settling that case and never had the IRS's interest computation independently checked. Wepplo's fallback argument is a good reminder that IRS-calculated interest isn't always correct even when the big legal theory is uncertain — a straightforward Section 6621 rate-table check can catch real dollars regardless of how the constitutional question resolves.
- Your accountant or attorney hasn't mentioned Kwong, Abdo, or the July 10, 2026 protective-claim deadline to you. Given how much money is potentially at stake — commentators have described the exposure across all affected taxpayers as running into the billions — this is a topic worth raising proactively rather than waiting to be told.
None of this is a guarantee of a refund. The Tax Court could still side with the IRS on the merits, and the government's appeal of Kwong could narrow or overturn that ruling entirely. But given how deliberately the Tax Court is treating Wepplo — full briefing, amicus input, oral argument — this is not a case to ignore if it applies to your situation.
Clean Records Make These Claims Possible
Cases like Wepplo highlight something a lot of business owners underappreciate: you can only chase down a refund like this if you know exactly what you paid, when, and how it was categorized. If your interest and penalty payments to the IRS are buried in a generic "Tax Expense" line with no dates or breakdown, reconstructing a claim years later is painful — you'll be digging through old bank statements and IRS transcripts from scratch.
This is where keeping your books in a format you actually control pays off. Beancount.io uses plain-text, version-controlled accounting, so every payment to the IRS — deficiency, interest, penalty — is its own dated, auditable entry you can search and export years later instead of hoping a bank or software vendor kept the record for you. Get started for free and see why developers and finance-minded business owners are switching to plain-text accounting for exactly these kinds of long-tail record-keeping needs.