IRS Processing Codes & Your Taxes in 2020: A Comprehensive Guide
As we approach tax season, many taxpayers are wondering what their IRS processing codes mean and how they will affect their taxes in 2020. These codes are used by the Internal Revenue Service (IRS) to identify and track tax returns, refunds, and other processing activities. Understanding these codes can be crucial for taxpayers to avoid errors, delays, or even audits. Here is a comprehensive guide to help you navigate through the different IRS processing codes.
What Are IRS Processing Codes?
IRS processing codes are three-digit numeric or alphanumeric codes used to indicate the progress or status of the tax return or payment. These codes are primarily used by the IRS computer systems to route and process the tax forms, validate the data, and make decisions on taxes owed or refunded. Each code has a specific meaning and may trigger different actions or reviews by the IRS.
For example, some of the most common IRS processing codes are:
– 150: Tax return filed
– 570: Additional account action pending
– 846: Refund issued
– 840: Balance owed
– 971: Notice issued
– 999: Tax return amended
These codes usually appear on the taxpayer’s transcripts, which are records of all the tax-related transactions between the taxpayer and the IRS. Transcripts can be obtained online, by mail, or by phone.
What Do IRS Processing Codes Mean for Your Taxes?
IRS processing codes can have various implications for your taxes, depending on the context and the code itself. Here are some examples of how the codes can affect your situation:
– Delayed refund: If your refund status shows code 570, it means the IRS is reviewing your tax return for accuracy or potential errors. This review may take up to 45 days, and during this period, your refund may be delayed. However, if you receive the code 846, it means your refund has been approved and issued, and you should expect to receive it soon.
– Underpayment penalty: If you owe taxes and code 840 is displayed, it means you have a balance due and may be subject to penalties or interest if you don’t pay the amount by the due date. You can avoid these penalties by paying on time or setting up a payment plan with the IRS.
– Audit risk: If your transcript shows multiple codes 971 or 972, it may indicate that the IRS has sent you notices about discrepancies or issues with your tax return. If these issues are not resolved, you may be audited by the IRS. It’s crucial to address any notices promptly and accurately to avoid further complications.
Overall, IRS processing codes can be essential indicators of your tax status, and understanding them can help you stay informed and prepared for any tax-related challenges. However, if you have any doubts or questions about these codes, you should consult a tax professional or contact the IRS directly for assistance.
Conclusion
In conclusion, IRS processing codes are an integral part of the tax system and can significantly impact taxpayers’ finances. By learning about these codes’ functions and meanings, taxpayers can avoid confusion, errors, or penalties related to their taxes. Always keep your tax records up-to-date and accurate, and stay informed about any changes or updates to the IRS processing codes and procedures. Happy filing!
