Blog · 16 October 2026

IRS COVID Refund Claim Denial Letters: Letter 105C, §6532 and What US CPA Firms Should Do Now

By Keshav Bansal, CA

An IRS COVID refund claim denial letter is arriving in client mailboxes while Kwong v. United States is still on appeal. National Taxpayer Advocate Erin Collins warned in an October 13, 2026 blog—covered the same day by USA TODAY’s Medora Lee and Bloomberg Tax’s Erin Slowey—that the IRS has begun denying or declining to process Kwong-related COVID refund and abatement claims before courts finish deciding whether the Court of Federal Claims reading of §7508A(d) stands. For US CPA firms, the job is not to re-argue the protective-claim filing strategy we covered after the government’s brief—it is to identify the letter, start the right clock, and keep clients from walking away or filing the wrong suit.

What Collins is seeing, and why it matters now

Under the Court of Federal Claims decision in Kwong, 179 Fed. Cl. 382 (2025), certain federal filing and payment deadlines during the COVID disaster period were treated as postponed from January 20, 2020 through July 10, 2023 (the May 11, 2023 end of the declaration plus 60 days). Lee reports that tens of millions of taxpayers may have been entitled to refunds or abatements of penalties and interest from that window, but that relief required a claim—generally by July 10 under the court’s reasoning. The government is appealing; no final decision has resolved whether those claims are valid.

The Journal of Accountancy (Martha Waggoner, Oct. 15, 2026) reports Collins’s volume figure: more than 275,000 Forms 843 asserting Kwong-related claims—still a small fraction of those potentially affected. She asked the IRS to identify taxpayers who received denial or “no consideration” letters, review those determinations, and correct them where appropriate. Her preferred path is to hold the claims until the litigation ends, then apply the final law consistently—tracking IRM guidance that generally supports delaying protective claims while related litigation is pending.

“If you received one of these letters, do not ignore it but don't assume it necessarily ends the matter either,” Collins wrote. Taxpayers who timely preserved their rights, she said, should not lose those rights because the IRS prematurely denied or declined to process claims while the controlling legal questions remain unresolved.

Letter 105C vs 106C vs everything else

Collins’s first instruction is to read the letter carefully. Different IRS communications have different legal consequences. The key question is whether the IRS issued a statutory notice of claim disallowance under IRC §6532(a). Collins says the IRS commonly uses Letter 105C for a full disallowance of a refund claim and Letter 106C for a partial disallowance.

Under §6532(a)(1), when the IRS mails that notice by certified or registered mail, the taxpayer generally has two years from the mailing date to file a refund suit—after waiting six months from the claim filing date unless the IRS decides the claim sooner. Section 6532(a)(2) allows an extension only by written agreement between the taxpayer and the IRS. Section 6532(a)(4) is easy to miss: reconsideration after the notice is mailed does not extend the time to sue. Waggoner’s JOA report echoes Collins—continued discussions with the IRS generally do not stop the two-year clock.

Not every letter is a 105C or 106C. A “no consideration” or screening response may feel like a denial but may not start the statutory suit period the same way. Diary the letter date, keep the envelope and any certified-mail evidence, and have counsel confirm the letter type before you tell a client the suit clock has—or has not—started.

Paid refund claim vs unpaid abatement

Collins also tells taxpayers to determine whether the disputed amount has already been paid. Procedures for a paid refund claim and an unpaid abatement request differ. A client who paid penalties or interest and filed Form 843 to get the money back is in refund territory. A client who still owes and is asking the IRS to abate unpaid amounts is not yet positioned for a classic refund suit. Mixing those tracks is how firms lose months.

If the amount remains unpaid, do not ignore collection notices. Collins notes that, depending on the facts, a taxpayer may be able to ask the IRS to delay certain collection activity while the legal issues are resolved. That is a collection conversation, not a substitute for protecting a refund-suit deadline if a statutory disallowance has already been mailed.

Where you can fight: Tax Court vs refund forums

Forum choice is the other trap. Tax Court is generally a prepayment forum after a notice of deficiency—the path in our Lindsey 90-day petition guide. Refund suits belong in U.S. district court (where a jury may be available) or the U.S. Court of Federal Claims, and only after a duly filed refund claim and the pay-first rules.

Flora v. United States, 362 U.S. 145 (1960), holds that full payment of the assessment is a jurisdictional prerequisite to an income-tax refund suit in federal district court. Unpaid penalties and interest are typically fought through abatement and collection channels, not by skipping to a refund complaint. For claim perfection and informal claims, see our Singh informal claim article. For the protective-claim filing playbook and the government’s Federal Circuit brief, use our protective refund claim / Kwong appeal post—this article is the denial-letter workflow, not a rewrite of that filing guide.

Appeals does not pause the clock; Form 907 can

Protesting a disallowance to the IRS Independent Office of Appeals is optional for many claimants and does not pause the two-year suit deadline. Form 907, Agreement to Extend the Time to Bring Suit (Rev. July 2026), is the written agreement §6532(a)(2) contemplates. The form and IRS guidance state that an appeal does not extend the period, that Form 907 is ineffective until an authorized IRS employee signs it, and that if the period expires without a signed agreement or a timely suit, the taxpayer loses the right to bring a refund suit and the IRS cannot issue a refund. If the deadline is imminent, file suit or get the signed Form 907—do not wait on a countersignature.

A CPA firm checklist for denial week

• Inventory every letter. Tag 105C, 106C, no-consideration, and collection notices separately; save certified-mail proof.
• Confirm paid vs unpaid. Map each year to refund claim or abatement track before recommending a court.
• Start the §6532 diary the day the letter arrives. Do not assume Appeals or “we’re still talking to the IRS” buys time.
• Consider Form 907 early if you need more administrative time and the IRS will sign—remember it is mutual.
• Refer litigation early. Forum timing, Flora full-payment and jury strategy are counsel calls.
• Watch Collins’s hold request. It is advocacy, not a freeze order; calendar the client’s own deadlines anyway.

Glen Frost of Frost Law told USA TODAY the firm has seen little consistency in IRS Kwong responses, often without clear instructions or deadlines.

Where Tax Brew fits

Denial-letter work turns on payment dates, claim copies, notice files and year-by-year schedules. Tax Brew provides bookkeeping, cleanup and tax prep support for US CPA firms, including workpapers when a Kwong file moves from “claim filed” to “letter received.” Your firm keeps the advice, representation and sign-off. The first 20 hours are free for qualifying engagements. See our services, or email info@taxbrewglobal.com.

Sources: Medora Lee, USA TODAY, “Got an IRS denial letter for COVID tax refund? Don't give up just yet” (Oct. 13, 2026); Erin Slowey, Bloomberg Tax, “IRS Begins Denying Pandemic Refund Claims as Lawsuit Plays Out” (Oct. 13, 2026); Martha Waggoner, Journal of Accountancy, “IRS urged by national taxpayer advocate to pause Kwong claims denials” (Oct. 15, 2026) (quoting National Taxpayer Advocate Erin Collins’s Oct. 13, 2026 blog); Kwong v. United States, 179 Fed. Cl. 382 (2025), as cited in JOA; 26 U.S.C. §6532 (Cornell LII); Form 907 (Rev. July 2026); IRS, Understanding your CP320B notice (Letter 105-C / Form 907); Flora v. United States, 362 U.S. 145 (1960). General information, not tax or legal advice. As of 16 October 2026.