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IRS Code 971 On IRS Transcript – What Taxpayers Need To Know

IRS Code 971 On IRS Transcript 2022-2023

IRS Code 971IRS Code 971 on an IRS Transcript indicates different possible actions based on the specific Action Code. The IRS usually sends a letter providing more details. Transaction codes and tax topics are used across IRS refund applications, tools, and account transcripts.  They are meant to inform individuals and business taxpayers about what is currently happening with their tax return processing.  These codes can indicate potential delays, when a refund will be paid, or why it was less than expected. Many taxpayers check their IRS account tax transcript for an update on their tax return processing and refund status.  This can be helpful when no information comes up using the Where is My Refund (WMR), IRS2Go Mobile App, or Your IRS Online Account.

Tax transcripts will frequently contain distinct codes to convey information to taxpayers. Keep in mind that the IRS tries to protect a taxpayer’s privacy. The code system might initially appear to be complicated and confusing,  However, IRS code 971 on an IRS transcript in 2022 & 2023 is fairly straightforward.

IRS Code 971 – A Closer Look

Seeing a code on your tax transcript can be confusing, but it’s typically nothing to be concerned about. Code 971 indicates that the IRS has issued you a letter informing you of changes to your return. This could relate to a number of distinct causes for the transition. Section 8 of the IRS Master File Codes lists TC 971 as a Miscellaneous Transaction. This is a catch-all designation.  It simply means that additional reviews are being undertaken or information is required. Usually, the notice will tell you what you need to do.

If an amount appears on a Code 971 line, it could be a reference to an adjusted return amount. Depending on the codes that were included, the IRS may have auto-adjusted your return.  Generally, the IRS will notify you of any modifications that will be made. Unless otherwise specified, the taxpayer is not required to take any action under Code 971. Calling the IRS is an option if you have any other issues regarding your tax transcript.  Speaking to an agent can help you from incurring any penalties.  Also, it can help ease any concerns regarding your tax filing status.

Transaction Codes on IRS Transcript 2022-2023

Transaction Codes (TC) are made up of three digits. They are used to identify a transaction that has been received and is being processed.  Also, they keep track of actions posted to a taxpayer’s account on the Master File. Every transaction processed by automatic data processing (ADP) must contain a Transaction Code. The information resource dictionary system (IDRS) is the United States Federal Information Processing Standard used to capture metadata during a system life cycle.  IRDS-specific transaction numbers are also supplied. These codes serve a number of functions:

  • Maintain Accounting Controls of debits and credits.
  • Cause the computer at ECC to post the transaction on the Master File.
  • Allow report compilation.
  • Identify the transaction when a transcript is extracted from the Master File.

Transaction Codes (TC) consist of three digits. They are used to identify a transaction being processed and to maintain a history of actions posted to a taxpayer’s account on the Master File. Every transaction processed by ADP must contain a Transaction Code to maintain Accounting Controls of debits and credits, to cause the computer at ECC to post the transaction on the Master File, to permit compilation of reports, and to identify the transaction when a transcript is extracted from the Master File. Transaction codes that are unique to IDRS are also included. (Source: irs.gov)

IRS Code 971 – What Happens Next?

IRS TC 197 is a general transaction code.  The IRS uses it to inform taxpayers there is a change or closer look at their return. Returns may be held for more than 21 days for a variety of reasons.  For example, if you file an injured spouse claim, file an amended return, or request a refund of tax withheld. Once processing is completed or an issue is detected, the tax topic will change to identify a new status.  Below are some of the common transaction codes:

Common IRS Transaction Codes

  • 150 – Tax Code 150 on an IRS Transcript means the return is received, entered into the IRS master file, and is under process within the system.
  • 151 – If the code changes to Topic No. 151, it indicates you are under an audit or your return is being held for further examination. Audits are done at different levels.  For most people, an audit just means an IRS agent will check your return manually. If warranted, they will send you a letter listing discrepancies, and adjustments, or ask for payment.
  • 160 – Tax topic 160 indicates that your refund has been electronically deposited.
  • 161 – Tax topic 161 implies your refund has been mailed out to the recipient on record. When the amount of the refund (paper check or direct deposit) is different than what was expected, indicating the IRS changed the amount, a notice explaining the adjustment is mailed to your address of record.
  • 171 –  CP171 reminds you about the amount you owe in tax, penalty, and interest. Read the notice carefully. It explains how much money you owe on your taxes.
  • 971 – Section 8 of the IRS Master File Codes lists TC 971 as a Miscellaneous Transaction. This is a catch-all designation.  It simply means that additional reviews are being undertaken or information is required. Usually, the notice will tell you what you need to do.

Possible Reasons for IRS Code 971 Notice Issued

There are many different reasons for an IRS Code 971 to appear on your tax transcript. However, the code is simply used to notify you that additional reviews are being undertaken or information is required. The code itself should not be a cause of concern. If there are going to be any delays, the notice will tell you what you need to do.

A tax refund can be delayed for a number of reasons.  For example, an incomplete return, an incorrect return, an amended return, tax fraud, and claiming tax credits.  Also, owing certain debts for which the government can take part or all of your refund.  Or improper payment instructions like sending your refund to the incorrect bank due to an incorrect routing number.

  • Incomplete or amended tax return
  • Wrong bank or incorrect routing number
  • Claiming tax credits
  • Duplicate tax return processed
  • Payment due
  • Collection of debt or Notice of Intent to Levy issued for certain debts in which the government can take part or all of your refund
  • Incorrect tax filing status

IRS Code 971 vs IRS Publication 971

Publication 971 applies to a spouse who may be relieved of what is owed in regard to a joint tax return.  Often, it includes being relieved of taxes as well as penalties. Examples include innocent spouse relief, separation of liability relief, and equitable relief.

By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these amounts from either you or your spouse (or former spouse). Innocent spouse relief only applies to individual income or self-employment taxes. (Source: irs.gov)

Frequently Asked Questions

Reviews could take anywhere from 45 to 60 days. However, in some instances, reviews could take as long as 120 days. The code indicates the IRS has made or is going to make an adjustment.  Therefore, they are updating the transcript as a form of notice. You may later receive another notice with a resolution.

What are the IRS audit codes?

Potential audit codes are among the more alarming IRS designations.  Potential audits are associated with IRS Transaction Codes 420 (TC 420 – Examination Indicator) and 424 (TC 424 – Examination Request Indicator).  Once your return has been processed via the IRS’s initial system processing, you should notice these codes on your tax transcript under the Explanation of Transactions section.

Up Next: Tax Code 150 on IRS Transcript 2022-2023

Tax Code 150 on IRS Transcript Tax Code 150 on an IRS Transcript means the return is received, entered into the IRS master file, and is under process within the system. Many taxpayers check their IRS account tax transcript for an update on their tax return processing and refund status.  This can be helpful when no information comes up using the IRS WMR tool or IRS2Go app. The IRS officially states that tax transcripts are not meant to assist you in determining specific refund dates.  Nor, are they designed to determine how much you will receive as a refund for the current tax year.  However, recent tax seasons show that tax transcripts can, in fact, provide useful information. Especially if you are experiencing long delays and are unable to obtain reimbursement information through the regular routes.

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