IRS transcripts are notorious for being extremely complex and very hard to follow. So in many cases, the IRS will tell you that ordering a Tax Transcript can not help you get your refund any faster. This is true in a way because ordering the tax transcript will not speed up the process of getting a tax refund. But the coding and transactions that have occurred and posted to the account transcript can be pretty useful for someone who has been waiting for longer than 30 days and has not been able to figure out what is holding their tax return up.
Here are some ways you can start implementing the use of transcripts.
- Waiting Longer Than 30 Days For an Update: The transaction codes that have occurred and posted to the account transcript can be pretty useful for someone who has been waiting for longer than 30 days and has not been able to figure out what is holding their tax return up.
- Track Letters & Notices: If the IRS is sending you a notice, the notice will show up as one of the line items on your account transcripts.
- Help Prevent Tax Return Fraud: One way you can help reduce tax return fraud is by being familiar with your transcripts. If a tax return has been filed with your information, it will show up on your account transcript as a line item. If you haven’t filed a return yet, this is a good indication that someone else has used your information for tax fraud. Checking your transcripts regularly could help prevent a fraudulent tax return from going any further by alerting the IRS as soon as you see the suspicious line item on the transcript. The damage done by the fraudulent claim will be significantly less if the refund money hasn’t been paid out yet. Taxpayers who fall victim to tax fraud have to wait longer to get their refunds— the typical identity theft case usually takes around 180 days to resolve. Some cases can take up to a year.
These are just a few of the reasons you should have Secure Online Access to the IRS “Get Transcripts” tool and be following your account transcripts closely.
Go Online to Get Transcripts by Mail or Call the IRS Direct
- Request an account transcript by going online or calling the IRS directly at (800) 829-1040 FREE, or by filing Form 4506T, Request for Transcript of Tax Return.
- The IRS does not charge a fee for transcripts.
- Ordinary turnaround time is between 5-10 Business Days.
Reading and Understanding IRS Transcripts
While IRS transcripts can be helpful, reading and understanding them can be complicated. The IRS’s processing system, the Integrated Data Retrieval System (IDRS), uses a system of codes to identify a transaction the IRS is processing and to maintain a history of actions posted to a taxpayer’s account. These Transaction Codes (TCs) basically provide processing instructions to the IRS’s system. To make IRS transcripts user-friendly for the public, the IRS provides a literal description of each TC shown on a taxpayer’s IRS transcript. Although helpful, sometimes these descriptions don’t adequately explain the account transaction. Document 11734, Transaction Code Pocket Guide, is a summarized list of TCs taken from section 8A of the IRS’s Document 6209, ADP and IDRS Information Reference Guide, both of which may be helpful when reviewing an IRS transcript.
A Closer Look at the IRS Record of Account Transcript
As shown in the fictitious example below, the Record of Account Transcript will summarize any balance due or overpayment on a taxpayer’s account for the specified year at the top of the form. If the account reflects a balance due, the transcript provides the date to which any accrued penalty and interest were calculated. Next, the transcript will show specific information from the taxpayer’s return – or the corrected amounts resulting from any changes to the return caused by either a request from the taxpayer or an IRS determination. This is noteworthy should a taxpayer find it necessary to file an amended return. The correct figures must be used as the starting point on Form 1040X, Amended US Individual Income Tax Return, when requesting any subsequent account adjustments – otherwise, processing problems may occur.
At the top right of the transcript is the date of request and date of response and the tax period covered by the transcript.
Check the taxpayer identification numbers below, as well as the taxpayer name or names, to make sure they are accurate.
The transcript next lists the account balance, meaning the tax liability due and still outstanding. Following that are the interest and penalties, if any, levied on the balance and the most current date of these levies.
The next section lists basic calculations from the return you submitted to the IRS. Included in that is the number of exemptions, the adjusted gross income, the taxable income, and the total tax liability. Following these calculations is the amount of self-employment tax owed by yourself and your spouse. These amounts may have been adjusted by you with an amendment to the return or by the IRS, according to its records and corrections.
The transcript next gives the date on which the return was due or received, whichever was later.
The final section lists transactions for the tax period, including the tax assessment amount and date, payments made and their dates, and any credits or refunds made and their date(s).
In the above example, tax credits, withholding credits, credits for interest the IRS owes to a taxpayer, and tax adjustments that reduce the amount of tax owed, are shown as negative amounts on the tax account transcript. In other words, negative amounts on an IRS transcript can be considered amounts “in the taxpayer’s favor.”
Some of the common TCs on the tax account portion of a transcript are:
- TC 150 – Date of filing and the amount of tax shown on the taxpayer’s return when filed – or as corrected by the IRS when processed;
- TC 196 – Interest Assessed;
- TC 276 – Failure to Pay Tax Penalty;
- TC 291 – Abatement Prior Tax Assessment;
- TC 300 – Additional Tax or Deficiency Assessment by Examination Division or Collection Division;
- TC 420 – Examination Indicator reflects that a return is under examination consideration though the return may or may not ultimately be audited;
- TC 428 – Examination or Appeals Case Transfer;
- TC 460 – Extension of Time for Filing;
- TC 480 – Offer in Compromise Pending;
- TC 494 – Notice of Deficiency;
- TC 520 – IRS Litigation Instituted;
- TC 530 – Indicates that an account is currently not collectible;
- TC 570 – Additional Account Action Pending/ Credit Hold freezes/pauses processing until the issue is resolved with a TC 571
- TC 571 – Resolves TC 570
- TC 582 – Lien Indicator;
- TC 768 – Earned Income Credit;
- TC 806 – Reflects any credit the taxpayer is given for tax withheld, as shown on the tax return and the taxpayer’s information statements such as Forms W-2 and 1099 attached to the taxpayer’s tax return; and
- TC 846 – Refund Issued – Represents the issuance of a taxpayer’s refund if the credits and withholding exceed the amount of tax due, and there are no issues with the return, the system will automatically generate a refund.
Because Transaction Codes(TC) on a taxpayer’s account are essentially instructions to the IRS system, it is important to note that some TCs are input for informational reasons not directly associated with an accounting-related dollar amount.
Create an Online Account with the IRS today
Taxpayers needing tax returns, tax accounts, or information return information may quickly find what they need through the IRS Get Transcripts portal or their online account. The IRS has started to expand access to the Online Account functionality and increase its availability to Individuals, practitioners, and businesses. Transcripts are free and provide a wealth of helpful information. We encourage taxpayers to explore this option.