What Does Account Balance Mean on IRS Transcript And How to Interpret It?

A certain percentage of your income goes to the IRS every month, either through the so-called payroll taxes or self-employment contributions. The account balance shown on an IRS transcript is the total of federal taxes you paid to the IRS throughout the year.

The number will be negative if you overpaid or positive if you underpaid taxes. Your tax transcript might also show account balance plus accruals value, indicating how much you owe the IRS with interest.

The IRS doesn’t include this information on all types of transcripts, so you must gain access to a specific transcript type if you want to check your account balance.

In this article, we’ll help you understand what account balance means on an IRS transcript and show you how to interpret it.

The Purpose of The Account Balance on IRS Transcript

All taxpayers with registered online accounts on the IRS website can see an overview of their payments for the last eighteen months. Hence, all you need to do whenever you want to check how much you have already paid to the IRS is log in to your account.

The IRS refers to this amount as the account balance and uses it as a basis for the tax refund calculation. The account balance on an IRS transcript shows how much the IRS received from you in a single tax year.

A minus sign next to the account balance indicates credit, meaning you overpaid your federal taxes. On the other hand, a positive number suggests that you still owe the IRS taxes.

The account balance doesn’t include tax credits, deductions, or additional tax liabilities the IRS may assess to your account when processing your return.

IRS transcripts usually feature accrued interests and penalties directly below the account balance line and show dates to which these penalties and interests were calculated.

Hence, the account balance line won’t show any penalties or interests the IRS assessed to your account. The Account Balance with Accruals line shows your account’s balance with penalties or interest.

If the IRS hasn’t charged any penalties or interest to your account, the amounts on Account Balance and the Account Balance with Accruals lines will be the same.

Calculating The Account Balance

When filing taxes, you’ll have to specify the amount your employer withholds from your wages on Form 1040. This information should be included on the form’s line 25a.

Employers use the information their employees provide on Form W4 to determine how much of the employee’s monthly wages they should withhold.

The withholding amount depends on various factors, including how much you earn or the number of dependents you claim on this form.

Form W2 you receive from your employer will show the federal income, social security, and Medicare amounts withheld from your wages. The annual sum of these amounts will be your account balance.

Your employer will have to adjust the withholding amount if you get a raise when your filing status changes from single to married or whenever you add a new dependent.

After these events, you may end up underpaying or overpaying your taxes if you don’t adjust the information on Form W4.

The account balance will reflect this, and you’ll owe taxes to the IRS if the withholding amount is insufficient to cover your tax liability. At the same time, the account balance will indicate credit if your employer withholds too much of your wages.

The IRS updates your account balance after each payment, and you must contact customer service if the amount remains the same after you or your employer make payment.

You can use the Tax Withholding Estimator on the IRS website to determine the appropriate withholding amount if you’re self-employed or to adjust the information on Form W4.

Where to Find Account Balance on IRS Transcript?

The IRS doesn’t include the account balance on all transcripts you can obtain with the Get Transcript tool. Hence, your tax return transcript won’t show how much tax you paid in a specific tax year, even though it contains other information listed on your tax return.

You must request a tax account transcript or a record of account transcript to see this information. The account balance line is at the top of the document, so you won’t spend much time looking for it.

As mentioned, the accrued interests and penalties will be directly below this line, followed by the account balance plus accruals line.

Understanding the information on these four lines on IRS transcripts isn’t hard, as their purpose is to show how much credit or balance due was assessed to your account.

What Does Account Balance Mean For Your Tax Refund?

The account balance sum doesn’t show you how much money you’ll get back or the amount you must pay to the IRS after your tax return is processed. It only tells you the total amount you or your employer paid to the IRS in a tax year.

As a result, your tax refund won’t be the same as the account balance because the IRS can assess different liabilities or credits to your account before approving your refund or determining that you still owe taxes.

However, a minus next to an account balance amount suggests you will likely receive a refund because you overpaid taxes and vice versa. If the account balance is a positive number, you’re unlikely to get a refund because you still owe taxes.

The Transactions section of a record of accounts transcript lists all actions the IRS takes when processing a return.

A transaction code corresponds with each action, so your transcript can contain Code 150, Code 290, or Code 971, depending on the actions the IRS takes while processing a return.

You can use this section of a tax account or record of accounts transcripts to check if the IRS assessed additional tax to your account, intends to garnish your refund or take other actions that might potentially lower your refund.

Your tax refund amount will be displayed on the Code 846 line, but remember that the presence of Code 898 or Code 570 on a transcript suggests that your refund will be lower than indicated by the amount next to Code 846.

Frequently Asked Questions

Using Account Balance to Interpret an IRS Transcript

Decoding an IRS transcript using only the account balance information isn’t possible because the amount only reflects your account’s balance before the IRS processes your return.

You can use this information to determine if you owe taxes before filing a tax return and settle the debt to avoid getting Notice CP14 from the IRS.

Checking and updating the withholding information you provided on Form W4 to your employer will ensure you won’t underpay taxes and create a debt during a tax year.

If you’re self-employed, you must correctly calculate your income, social security, or Medicare withholdings and check your account balance regularly to ensure you don’t owe taxes to the IRS.

The account balance with the accruals line on your transcript will show you how much you must pay to settle your tax obligations. We hope this article helped you understand the meaning of the account balance line on your tax transcript and made its interpretation easier.