When you hire a tax professional to resolve a tax matter, one of the first steps they will take is a review of your IRS account transcripts.
An account transcript provides you with a complete history of your tax account, which can be useful for determining things such as the status of your tax return or refund, whether there have been tax offsets, or even if there was an audit adjustment.
But you have to understand how to read the transcript which can seem mystifying at first.
How to get your account transcript
There are various types of transcripts available, but in this article we’ll be discussing account transcripts.
You can download your account transcripts or have them mailed to you from the IRS website: https://www.irs.gov/individuals/get-transcript
How to read an account transcript
An account transcript has two sections. The first section of the transcript shows a summary of your tax account (Account Balance, Accrued Interest, and Accrued Penalty) and a summary of your tax return (Adjusted Gross Income, Taxable Income, etc.).
Following that, you will find your account transactions which consist of several rows of Codes, Explanations, Dates, and Amounts. Here’s an example:
These Codes on the left, known as Transaction Codes (TC), can mean various things.
In this example of a transcript, we can see the following:
- TC 150 means the tax return was processed. This amount of $4,054 would match line 24 of the tax return (total tax).
- TC 806 shows credits for W-2 and 1099 withholding in the amount of $5,530.
- TC 846 dated 2-18-2021 shows a refund of $1,476 was issued ($4,054 total tax – $5,530 W-2 and 1099 withholding). This would match line 34 of the tax return (refund amount).
- TC 766 shows tax relief credits, such as economic impact payments. The refunds related to these credits can be seen in the TC 846 amounts of $1,200 and $600.
- TC 291 shows that $1,224 in taxes were reduced by the IRS. This could be for a number of reasons, such as if the filer included unemployment compensation as income (which was non-taxable per the 2021 American Rescue Plan). A refund of $1,226.11 was issued for these abated taxes, which includes $2.11 interest.
- TC 290 – A positive amount would indicate that additional taxes were assessed by the IRS. This is followed by an IRS notice or letter (TC 971). An amount of $0 usually indicates a routine freeze or hold was lifted and can be simply ignored.
If you’re dealing with a tax debt, you may see any of these following Codes:
- TC 276 – Failure to Pay Penalty
- TC 300 – Additional Tax or Deficiency Assessment by Examination Division or Collection Division
- TC 480 – Offer in Compromise Pending
- TC 494 – Notice of Deficiency
- TC 582 – Lien Indicator
- TC 971 – Generic code for an IRS notice or letter that will provide additional detail regarding your tax return
There are hundreds of Transaction Codes, of which a full list can be found here: https://www.irs.gov/pub/irs-pia/6209sec8amasterfilecodes.pdf