IRS Code 768: What Does It Mean on IRS Transcript?

Eligible taxpayers can use earned income tax credits to reduce their tax liabilities. IRS Code 768 is added to tax account transcripts after the IRS approves this credit.

Its addition to a transcript doesn’t indicate that the IRS has finished processing a tax return or when your refund will be issued, but rather that the EITC became effective on your tax account.

You don’t have to be a tax expert to understand Code 768 because its presence on an IRS transcript always means the same thing. We’ll show you how to interpret this transaction code and what it means for your tax refund.

What is Earned Income Tax Credit?

The Earned Income Tax Credit was established in 1975 to soften the effects Social Security and Medicare taxes had on low-income families at the time.

This refundable credit enables families to offset some or all of their tax liabilities and receive a refund if the credit amount exceeds their income tax debt.

Taxpayers must meet the criteria below to claim this credit on their tax returns.

• Work legally in the United States and earn under $59,187.
• Generate less than $10,300 of investment income.
• Have a Social Security Number.
• Hold a US Citizenship or be a resident alien for at least a year.
• Not file Form 2555, Foreign Earned Income.

Your filing status and the number of children you have can also affect your eligibility to claim EITC and the maximum credit amount you can receive.

It’s worth adding that taxpayers who don’t have children and choose the Single filing status can also be eligible for this tax credit if they meet other criteria. Seeing IRS Code 768 on your tax account transcript indicates that you check all the boxes.

Still, you must ensure you’re eligible for this tax credit before filing a return to avoid processing complications.

PATH Act and EITC

The Protecting Americans from Tax Hikes Act introduced several changes to the EITC and the Additional Child Tax Credit (ACTC).

Most notably, PATH increased the EITC’s phase-out threshold by $5,000 for taxpayers who chose the Married Filing Jointly filing status.

Before the PATH Act was enacted, taxpayers could claim EITC retroactively, even for years when they didn’t have a valid Social Security Number. Under present regulations, you can only claim EITC for the current tax year if you have a valid SSN.

This act also permits the IRS to penalize taxpayers who erroneously claim this tax credit. The penalty is calculated based on the taxpayer’s tax liability after removing the EITC adjustment from the return.

The IRS might ban you from claiming EITC for up to ten years if you claim this credit despite not meeting all the criteria.

EITC and Processing Delays

The PATH Act prevents the IRS from issuing refunds to taxpayers who claim EITC on their returns prior to February 15. Hence, EITC can be why the processing of your return is delayed.

This limit was placed with the aim of preventing tax fraud and identity theft by giving the IRS enough time to compare the information employers send on W2 forms by January 31 with the information on taxpayers’ returns.

The IRS often audits returns with EITC claims, which is why the processing of your tax return can be temporarily on hold. 

Consequently, you might see Code 971, Code 570, or similar transaction codes on your transcript that indicate the processing of your tax return was delayed beyond the usual three-week span.

You won’t be required to take action if these codes appear in your tax account transcript unless the IRS sends you a notice with instructions regarding the steps you must take before they can continue processing your return.

Accessing Tax Account Transcript

E-filers can easily monitor their tax return’s status with the Get Transcript tool available on the IRS website.

The tool gives you access to several types of tax transcripts, so you must request access to the tax account transcript if you want to see how the processing of your tax return is progressing.

Unlike tax return transcripts or wage and income transcripts, tax account transcripts contain transaction codes that inform you of each action the IRS takes while processing your return.

These codes appear in tax account transcripts at different processing stages. You’ll only see Code 150 and a handful of others shortly after your tax return enters the Individual Master File system.

Code 768 is usually added to tax account transcripts during late processing stages when the IRS approves EITC and assigns it to an account.

IRS Code 768 Analysis

Section 8A – Master File Codes document offers only a brief explanation of Code 768. The remarks section next to this code reads:

‘Posts Earned Income Credit which is generated from information received from Code and Edit.’

This cryptic message means little to most taxpayers as it does not explain the code’s meaning.

The code 768 line on a tax account transcript is slightly more informative. It has four sections that contain bits of information you can use to determine how this tax credit will affect your tax refund.

• Code – All tax code numbers are in this column, which makes determining if Code 768 was added to your account somewhat easier.
• Explanation of transaction – You’ll see the ‘Earned Income Credit’ description next to Code 768.
• Date – This section shows you the date when EITC was assessed to your account. The date doesn’t indicate when the IRS will issue your refund.
• Amount – The total EITC amount will appear in this section. Please note that the EITC amount isn’t equal to the tax refund amount because it may be reduced by any tax liabilities you may have.

The Meaning of IRS Code 768

The addition of this code to your tax account transcript means two things. The IRS has approved your EITC claim and determined the amount you can receive based on your income and other parameters.

Code 768 doesn’t mean your tax refund is approved, and you’ll have to wait for Code 846 to appear in your tax transcript to find out the tax refund amount.

This code can also indicate that the IRS has completed auditing your tax return and resumed its processing. However, Code 768 cannot help you determine how long the IRS will need to approve your tax refund, provided you’re eligible for one.

Frequently Asked Questions

Reach Out to a CPA

Taxpayers who claim Earned Income Tax Credit on their tax returns will see Code 768 on their tax transcripts if the IRS approves their claim. This transaction code doesn’t guarantee you’ll receive a tax refund, as the approved amount may not be sufficient to cover your tax liabilities.

Call 866-8000-TAX or visit choicetaxrelief.com to speak with a CPA that can maximize your chances of getting this tax credit.

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