The IRS Code 150: What Does It Mean on an IRS Transcript?Personal Taxes
The processing of your tax return starts when the IRS uploads it to the Individual Master File. The IRS Code 150 only confirms that your tax return was accepted and awaiting further processing.
This code indicates the taxpayer’s liability towards the IRS based on the information acquired from Form 1040.
The amount displayed next to the code is used to calculate the tax refund, but on its own, it cannot tell you how much money you’ll receive after the IRS processes your tax return
In this article, we’ll show you how to interpret the IRS Code 150 and help you figure out what it means on an IRS transcript.
Understanding the IRS Account Transcripts
All taxpayers who file their taxes electronically can monitor their tax return status with an account transcript. Doing so is often unnecessary because the IRS processes most tax returns in three weeks.
However, account transcripts can be useful if the IRS needs more than three weeks to process your tax return. The document contains codes for each action taken during the processing stage allowing the taxpayer to know if the IRS detected issues that might delay the refund.
Gaining access to a transcript in digital form is fairly easy if you already have an IRS account. All you need to do is make sure you’re logged in to your account and navigate to the Get Transcript section of the IRS website.
Once there, you can request the account transcript after providing a reason why you need a transcript. In addition, you can request to have an account transcript sent to your home address from the Get Transcript section.
Why Does the IRS Use Transaction Codes?
Account transcripts become available after the IRS adds a tax return to the Individual Master File system. At first, a transcript contains only a handful of codes that indicate the IRS accepted all information a taxpayer included in Form 1040 and initiated the processing stage.
The IRS updates transaction codes in the account transcript every week to reveal which actions were taken since the last update. These codes have three digits and have an Explanation of Transaction, Date, and Amount sections.
Despite being easy to understand, the furnished information can seem cryptic if you don’t know how to interpret it. The important thing to note is that they usually reveal the amount of credit and offset a taxpayer generated during a fiscal year.
Their main purpose is to inform a taxpayer of the tax return’s current status and help calculate the tax refund.
The IRS Code 150 Analysis
Code 150 is the first code you’ll see in an account transcript because it is always located at the top of the transcript.
Unlike other transaction codes added to the transcript during the review, Code 150 will be present in your account transcript throughout the entire processing stage.
The code is usually followed by the Return Filed & Tax Liability Assessed description in the Explanation of Transaction section.
Hence, Code 150 implies that your tax return has entered the IMF system and that the IRS assessed your Tax Liability using the information from Form 1040.
In other words, this code shows the tax debt you owe to the government, and it serves as one of the parameters the IRS will use to calculate your tax return. Besides the Code and Explanation of Transaction sections, you’ll also see the Date and Amount sections next to the code.
Let’s take a look at what they mean.
This section doesn’t provide information you can use to estimate when your tax refund might become available. The date next to Code 150 shows the date when a tax refund entered the IMF system.
However, you can use it to guess the earliest date when the IRS might process your tax return. The average processing time is three weeks.
So, you should expect to see Code 846 Refund Issued in your account transcript three weeks after the date displayed next to Code 150 if the IRS doesn’t detect any problems with your tax return.
You can see the tax liability sum in the Amount section of Code 150. Its value would be zero if you didn’t overpay or underpay your federal taxes. However, this section might show you don’t owe taxes to the government even if the IRS still determines your tax liability.
The negative value in this section suggests you overpaid federal taxes and that the sum will be added to the refund or used to reduce other offsets. A positive number in Code 150’s Amount section indicates a taxpayer has an outstanding debt to the IRS.
Account transcripts have a Cycle section located between the Explanation of Transaction and Date columns. The so-called irs cycle code doesn’t have anything to do with Code 150 or other transaction codes listed in an account transcript.
This code only shows the account’s processing cycle and doesn’t refer to actions the IRS takes while reviewing a tax refund.
The Implications of the IRS Code 150
As we already noted, the amount next to Code 150 can help you calculate your tax refund. You must first check if the amount is positive or negative.
In case the amount is positive, you should add it to the sum next to any other offset codes on your account transcript, such as Code 898, and subtract it from the tax credit.
The negative code, 150 Amount value, indicates a federal tax overpayment. The IRS will treat this sum as credit. Hence, if your tax liability amount is negative, you should add it to the sum next to Code 806 or other transaction codes that indicate credit and then subtract all offsets.
The resulting sum in both cases will be the tax refund amount.
Frequently Asked Questions
This code is added to all account transcripts to indicate that the IRS has accepted a tax return and that processing is underway.
This message will only appear in Code 150’s description if a taxpayer hasn’t filed a return in more than a year. The message suggests the IRS will issue a penalty and that the details will be shared directly with the taxpayer.
This code only suggests that the IRS accepted your tax return for review and it doesn’t indicate a tax refund is approved. Code 846 will pop up in your tax account transcript after the IRS processes your tax return and approves a refund.
The presence of Code 150 in a tax transcript doesn’t mean the IRS will approve a refund for the claimed amount. The IRS retains the right to reject or adjust your tax refund through the processing stage.
The inclusion of Code 150 in an account transcript is a standard practice used to inform taxpayers their tax returns are being processed.
This amount next to the code shows if you overpaid or underpaid your federal taxes, and it doesn’t include credit you generated during a year.
Hence, the term liability in the code’s description doesn’t necessarily mean you owe extra taxes to the government.
The Code 150 Amount can help you determine the value of your tax refund but only in combination with other transaction codes on your account transcript.
So, in most cases, the presence of this code on an account transcript only means that the IRS approved a tax return review.
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.