Filing an amended tax return involves going through several preparatory stages before you can submit all the documents the IRS needs to start processing a return.
The purpose of IRS Code 977 is to inform you that your amended return is being processed.
This TC is the equivalent of IRS Code 150 that appears on a tax account transcript after a tax return enters the Individual Master File (IMF) system.
Let’s dive deeper and see what IRS Code 977 means on an IRS transcript.
Table of Contents
What is an Amended Tax Return?
US taxpayers can correct mistakes they’ve made in an original tax return by filing an amended return. The legal time frame for filing amended returns is three years after filing the original return.
Moreover, you can amend the information on the original tax return before the filing deadline. In this case, the IRS will treat the amended return as original to avoid processing delays.
It’s vital to ensure filing an amended tax return is necessary because the IRS often corrects minor mistakes without requesting additional action from taxpayers.
The Interactive Tax Assistant tool on the IRS website can help you determine if filing an amended tax return is necessary by completing a short questionnaire.
Depending on your answers, you may be instructed to postpone amending your return until the IRS sends you a formal request or file an amended return as soon as possible.
Reasons to Amend an Original Tax Return
Taxpayers who don’t attach Form W-2 or make an apparent math error on the original tax return don’t have to correct these mistakes. However, you may have to file an amended tax return if you underreport taxable income or fail to claim a tax deduction.
Here are some of the most common reasons to file an amended tax return:
- Changing the filing status.
- Adding a dependent.
- Making an income adjustment.
- Claiming tax credits.
- Claiming tax deductions.
It’s also worth noting that a new tax law can make you eligible for a tax refund retroactively, so filing an amended tax return could enable you to collect the funds the federal government owes you under a new law.
However, you should only consider filing an amended tax return if the refund amount is considerable.
Unclaimed tax credits and deductions or retroactive tax laws usually don’t affect refund amounts substantially, which is why in these situations, you don’t have much to gain from filing an amended return.
Obtaining a Tax Account Transcript
Taxpayers can use the Where’s My Amended Return tool available on the IRS website to check if the IRS accepted their returns. Code 977 will appear on the tool’s dashboard after an amended tax return enters the IRS system.
This could take up to three weeks if you file a paper version of Form 1040-X, Amended US Tax Individual Income Tax Return, Form 8879, and all other documents necessary to complete the amended tax return filing process successfully.
It’s also worth adding that eligible taxpayers can e-file amended tax returns to shorten the time the IRS needs to upload their returns to its system.
This transaction code will also be posted to your tax account transcript once the amended return enters the system. If you have an online IRS account, you can access this transcript with the Get Transcript tool on the IRS website.
An Overview of IRS Code 977
Code 977 line will provide the same information regardless of the method you use to monitor the status of your amended return.
On a tax account transcript, you’ll see Code 971 Amended Return or Claim Forwarded for Processing line above Code 977. Both codes will have the same date indicating that the IRS has accepted the amended return.
The ‘Amended Return Filed’ description in the Code 977 line Explanation of Transaction section only confirms your return is being processed. The amount section doesn’t display your tax liability or credit, so the sum is often $0.00.
Section 8A –Master File Codes clarifies why the amount section in this line is zero by stating: ‘an amount posted with TC 977 is a remittance amount and doesn’t reflect the liability adjustment.’
As a result, you cannot use the code’s amount section to determine the tax refund sum. The IRS uses TC 29x and 30x to denote all actions affecting taxpayers’ tax liability.
It’s also important to understand the term Condition Code G (Amended) when interpreting Code 977 because the IRS uses it to refer to a duplicate tax return or a return with incorrect information that was amended.
Condition Code G indicates that an account is frozen until the information on a return is amended. So, the processing of your return will be postponed until the issue is resolved.
The Meaning of IRS Code 977 on a Tax Transcript
Code 977 replaces Code 150 on a tax account transcript. This doesn’t mean Code 150 will be removed from the transcript but that its processing resets from the date displayed next to Code 977.
These transaction codes are similar, but unlike Code 150, Code 977 line doesn’t have the Cycle Code section. Consequently, filing an amended tax return won’t affect your account’s processing cycle.
Code 977’s title in the Master File Codes document is ‘Posted Amended Return, Posted Consolidated, Generated, Amended.’ The code’s title indicates that the IRS can utilize this TC if taxpayers don’t reply to a notice or DOL (Department of Labor) referral.
Even so, Code 977 usually informs taxpayers that the IRS hasn’t detected any issues during their amended return’s initial review.
If you amended the original tax return before the filing deadline, this code could indicate that your filing status or tax deduction amount is amended. The IRS will continue processing your return after this code is posted to your tax account transcript.
An additional review or audit might be necessary if the IRS finds the information on an amended return is inaccurate. However, most taxpayers can expect to receive their tax refunds without delays.
The IRS needs up to twenty weeks to approve an amended return refund, so you must check your return’s status regularly during that time.
Frequently Asked Questions
You have up to three years after filing the original tax return or two years from the date you paid your federal taxes to file an amended tax return involving a credit or refund.
Code 977 only informs you that the IRS has accepted your amended return for processing. It doesn’t indicate whether or not the IRS will approve your refund.
This TC will be posted to your tax account transcript if you decide to file for an additional refund after receiving the original tax refund.
You must wait three weeks before checking if Code 977 was added to your tax account transcript. Your amended return was probably rejected if you can’t find this TC in the tax transcript, and you’ll have to file a new one.
IRS Code 977 as a Replacement for Code 150
Although TC 150 and TC 977 aren’t identical, their purpose is often similar. These codes inform taxpayers that the IRS has started processing their tax returns.
TC 150 is posted to a tax account transcript a few days after you file the original tax return. On the other hand, TC 977 usually appears in this document several weeks after filing an amended return.
Hence, the primary purpose of TC 977 is to notify you that your amended return has entered the IRS system. Any additional credit or liability assessments the IRS assigns to your account while processing the return will be noted with other transaction codes.
Author:
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.
