Tax return processing doesn’t always go smoothly, as every year, the IRS delays a certain percentage of returns due to additional reviews.
You’ll see different transaction codes pop up on your tax account if the IRS selects your tax return for an additional return.
You’ll likely see Code 290 if the IRS assesses additional tax to your account during a review, while IRS Code 291 might show up if the IRS removes a portion or the entire tax liability assessed to your account during a review.
The inclusion of this transaction code in a tax account return is generally good news because it suggests that the processing of your tax return is no longer on hold.
In this article, we’ll explain what IRS Code 291 means on a tax account transcript and whether you need to do anything.
Table of Contents
Understanding Tax Abatements
Most taxpayers encounter this term in the context of tax penalty abatements. However, the IRS uses tax abatements to suggest to taxpayers that a part or an entire tax amount added to their account after they filed a return is included in their tax refund.
The title of Code 291 in Section 8A – Master Code File document is ‘Abatement Prior Tax Assessment’. Hence, the code indicates that a taxpayer’s tax liability has been reduced or eliminated.
In most cases you’ll see this code on your tax account transcript if the IRS determines the initial assessment of your tax liability is greater than it should be.
Code 291 is a credit code that can sometimes mean that the IRS has waived a portion of your tax liability or that IMF has generated abatements for computer-generated interests, thus creating credit assigned to your account.
Requesting a Tax Account Transcript
You must have an account on the IRS website to access the digital version of your tax account transcript.
The Get Transcript tool enables you to request different types of transcripts including tax return transcripts and tax account transcripts.
Taxpayers that don’t e-file their tax returns can have a paper version of their tax account transcript delivered to their home address via mail. The IRS doesn’t fax transcripts due to security reasons.
Unlike tax return transcripts, tax account transcripts contain transaction codes that inform taxpayers about different actions the IRS takes while processing their tax returns. These codes usually refer to different tax credits and tax liabilities or indicate that the IRS has approved a tax refund. So, Code 291 will appear in your tax account transcript if the IRS determines you’re eligible to receive a portion of tax assessed to your account.
IRS Code 291 Analysis
Like all transaction codes you’ll see on a tax account transcript, Code 291 line will contain four sections.
- Code – This column contains the code’s number.
- Explanation of Transaction – The ‘reduced or removed prior tax’ description will be displayed next to Code 291’s number.
- Date – This section of the Code 291 line shows when the IRS assigned this code to your account.
- Amount – The sum in this column will be negative if the IRS determines that you’re eligible to receive a portion or the entire additional assessed tax amount.
Code 291 appears in conjunction with several transaction codes such as Code 150, Code 290, Code 197, and Code 300. Each of these codes refers to different types of additional tax assessments.
The Meaning of IRS Code 291 on an Account Transcript
The Remarks section of the Master Code Files documents states that Code 291 ‘abates a previously posted 150 and/or 290 or 300 in whole or in part.’
The same section also reveals that Code 291 can:
- Generate abatements (TC 197) of computer-generated interest where applicable.
- Releases the same freezes and holds as TC 290.
- The code’s MFT 10 500-519 blocking series is exclusively used for FUTA purposes.
The vast majority of taxpayers will see Code 291 together with Code 290. These codes can appear together even if the amount next to Code 290 is $0,00.
Code 291 will appear in your tax return if you’re eligible for a refund or a tax bill adjustment after the IRS completes the additional review of your tax return.
Code 290 is often added to a tax return because the Individual Master File makes automatic adjustments to tax returns that contain information that doesn’t match the information in the system.
You’ll see Code 291 on your tax account transcript if the automatic review reveals that you owe less federal taxes than you reported on your tax return and that the Code 290 amount is zero.
It’s important to remember that the amount next to Code 291 doesn’t reveal the entire tax refund amount. Hence, you’ll have to wait for Code 846 Refund Issued to appear on your tax transcript to find out the tax refund amount the IRS approved for your account.
The meaning of this transaction code will be different if it appears together with Code 197, Code 300, or other transaction codes we mentioned earlier.
Even so, Code 291 always indicates that a portion of an entire additional tax assessment is treated as a credit.
Frequently Asked Questions
Claiming the Earned Income Tax Credit can sometimes prompt the IRS to add Code 291 to your tax account transcript if the review of your tax return reveals you don’t meet all the requirements to qualify for this tax credit.
This code usually means that the IRS assigned credit to your account that lowers your tax liability, so its addition to your tax account transcript means you’ll pay fewer federal taxes.
IRS Code 291 appears on a tax account transcript after the IRS completes the review of a tax return and determines a taxpayer is eligible for a reduction or removal of the previously assessed tax.
In the best-case scenario, you must wait for a few days after Code 291 appears on your tax account for the IRS to approve your refund. The waiting time can extend to a couple of weeks if the IRS needs to conduct additional reviews before approving your refund.
Reach Out to a CPA
The context often determines the meaning of IRS Code 291, even though this code usually indicates that the IRS assigned tax credits to your account.
Consequently, the correct interpretation of this code will depend on other transaction codes on your tax account transcript.
Go to choicetaxrelief.com or call 866-8000-TAX to book a free meeting with a CPA who can help you understand what IRS Code 291 means on your tax account transcript.
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.
