Tax return processing delays are common as every year, millions of taxpayers receive their tax refunds after the deadline.
When such a delay occurs, the IRS uses Code 971 to inform you that they sent you a notice regarding the changes on your tax return or plan to conduct an additional review of your tax return.
The addition of this code to a tax account transcript doesn’t suggest that the IRS intends to initiate an audit or reject any tax credit claims you may have made.
It only indicates that the processing of your tax return is temporarily on hold until you provide the information the IRS needs to approve your tax refund.
We’ll explain what the IRS Code 971 could mean on an IRS transcript and help you understand how it can affect the status of your tax return.
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Gaining Access to the IRS Transcripts
E-Filers can request access to different types of transcripts using the Get Transcript tool on the IRS website. The tax account transcript contains all transactions the IRS assigns to your account while processing your tax return.
This transcript will contain Code 971 if the IRS intends to make changes to a tax return without the taxpayer’s assistance or if the agency needs additional information to resume processing a tax return.
Unlike Code 150, which is added to a tax transcript as soon as a tax return enters the IMF system, the IRS Code 971 usually appears in transcripts during subsequent processing stages.
As a result, you may not see this code on your tax account transcript immediately after the IRS accepts your tax return.
Interpreting the IRS Code 971
The meaning of the IRS Code 971 is often contextual because it is often accompanied by Code 570 or similar transaction codes that indicate the IRS needs to take additional action before completing the processing of a tax return.
The ‘Explanation of Transaction section next to Code 971 can display different messages such as ‘claim forwarded for processing,’ ‘notice issued,’ or ‘Amended Tax Return.’
The code’s official description is ‘miscellaneous transactions,’ which indicates that the IRS uses it to refer to various transactions it assigns to taxpayers’ accounts.
The date column shows when the IRS has issued a notice or made changes to a tax return that don’t require any action from a taxpayer. This code doesn’t always appear with a date and in some cases, it shows the same date as Code 571 and Code 572.
The amount column next to Code 971 shows the amount after the return adjustment. The $0.00 value suggests that the adjustment doesn’t affect the tax refund amount.
Consequently the correct interpretation of Code 971 depends on the information the IRS provides in the Explanation of Transaction, Date, and Amount columns next to this code.
The Common Causes of the IRS Code 971
The ‘miscellaneous transaction’ designation indicates that Code 971 might appear in a tax account transcript for various reasons.
Its presence on a tax transcript always suggests that the processing of a tax return is delayed, but the causes of the delay may vary. In most cases, the IRS adds this code to a tax account transcript for the following reasons:
- Notice of Intent to Levy.
- Filing an amended tax return.
- A bankruptcy notification.
- Correction of a tax refund.
- A duplicate notice was issued to a spouse.
- Claiming Earned Income Tax Credit.
- Processing of a duplicate tax return.
- Transfer of balance to a split liability account.
- Due collections.
You will receive a letter with instructions on how to proceed from the IRS after Code 971 appears in your tax transcript. Hence, you shouldn’t take any steps to resolve the issue until the IRS discloses which information they need from you.
Calling the IRS and speaking to an agent might help you fix the problem that caused Code 971 to appear in your tax transcript faster.
Sometimes this code only suggests that the IRS intends to conduct an additional tax return review, and in this case, you’re not required to supply more documents or take any other steps.
The Differences Between the IRS Code 971 and the IRS Publication 971
Assuming that the IRS Code 971 and the IRS Publication 971 are the same is one of the most common mistakes taxpayers make when they see this code in a tax transcript.
The publication refers to a tax relief issue, while Code 971 denotes actions the IRS takes while processing a tax return.
Married couples that choose to file taxes jointly should study Publication 971 because it outlines the conditions under which a spouse can be relieved of interests, penalties, and taxes.
The document covers the following topics:
- Separation of liability relief.
- Equitable relief.
- Innocent spouse relief.
The IRS Code 971 and the IRS Publication 971 don’t have anything in common except a similar title. However, taking the time to read this publication can help you avoid some of the common causes of Code 971, such as duplicate notices sent to a spouse.
Frequently Asked Questions
This message will appear in the ‘Explanation of Transaction’ section next to Code 971 if the IRS sends a notice to a taxpayer.
Depending on the severity of the problem, the IRS might need anywhere between a few days and a couple of months to resolve a Code 971 issue and resume processing a tax return.
Your tax refund might be delayed for several months if the IRS includes this code in your tax account transcript. In most cases, the tax refund should be in your bank account three to six weeks after the issue that caused Code 971 to appear in your tax transcript is resolved.
You can reach out to the IRS by calling 800-829-1040 for more information about the individual tax return or 800-829-4933 if you need information about a business tax return. Doing so might help you determine why Code 971 was added to your tax account transcript.
Speak to a CPA
Although Code 971 doesn’t usually indicate there is something wrong with your tax return, understanding its implications requires a certain level of familiarity with the procedures the IRS uses to process tax returns and approve refunds.
Call 866-8000-TAX or visit ChoiceTaxRelief.com if you’d like to speak with a CPA who can help you get to the bottom of the problem that caused the IRS Code 971 to appear in your tax account transcript.
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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.
