Overview of Different IRS Codes Related to Tax Refund Claims
While an IRS tax transcript provides quick information about a specific item in a federal tax return, the numeric Transaction Codes are at times confusing. A notice about a Tax Topic coded as TC 152, gives advice that it will take more than the customary 21 days to process a refund claim. If an individual subsequently receives a TC 971 notice, it contains information about the delays in the review of his or her federal tax return.
Apparently, millions of tax filers have received TC 971 transcripts in connection with their 2021 tax returns, as the IRS is currently dealing with a massive number of backlogs. Reports have it that for the 2021 personal tax returns filed this 2022 tax season, the IRS still has to review around 9 million returns.
Those are in addition to the 5 million 2020 returns filed in 2021 still pending completion of review. The delays in processing are mostly caused by tax issues that tax refund claimants still need to resolve.
While the aforementioned answers the “What is IRS code 971 on transcript?” many ask, who receives a 971 IRS Transcript?
Who Receives a TC 971 Tax Transcripts?
Tax filers who previously received a TC 570 Transcript, which is a prior notice that the review of a tax return will be delayed, will subsequently receive an IRS transcript coded as 971. This transcript follows to provide details about the status of, or issues affecting the tax refund claim.
971 Transcript with Changes in IRS 570 Info
In reading a 971 Transcript, take note if the line amount of a 570 transaction code reflects a $0 value. If so, it denotes that a confirmation of the refund claim is still unavailable. The amount is still subject to change if after the review, the IRS examiner finds reason to adjust the amount being claimed as refund.
Recipients of a 971 transcript must also take note of the line date for the 570 transaction code, as the details of the 971 transcript may pertain to an earlier or previous tax season.
Take note that if the date appearing on the TC 570 code line is the same as the date appearing in the line date of the TC 971 transcript, it means processing of the claim for refund has been completed. This also means that the line amounts of the TC 570 and TC 971 reflect the same value, which the IRS might have adjusted.
In some cases, the TC 570 transcript for a tax refund may make progress by transitioning into a TC 571 item (freeze resolved); or become TC 572, which means the claim has been resolved correctly but requires additional action. The 971 Transcript will provide information about the resolution pertaining to any of these changes.
A 971 Transcript containing information that the claim for refund has been resolved, the next transcript that the IRS will prepare is for the 846 IRS Code. It’s the final notice informing a tax filer that the refund claim has been sent or deposited to the tax filer’s bank account.
If the tax filer has good reason to contest the adjusted amount appearing in the 971 Transcript, the individual must do so as soon as possible before the processing of the final 846 Notice.