As a seasoned data analyst and tax code enthusiast, I’m always trying to better understand the intricate world of IRS rules and regulations. And few things seem as mysterious to taxpayers as the alphanumeric soup of codes littered across their account transcripts.
Two codes that frequently create confusion are 846 and 971. From my research and discussions with CPAs, I’m going to provide a detailed look at what these codes mean, when you could see them, and most importantly – what you should do if you find them on your own account!
Code 846: Your Golden Refund Ticket
When you file your taxes, the payoff is getting your hard-earned refund back in your bank account where it belongs.
After submitting your tax return, the 846 code is what you’re waiting for – it means your refund has been approved! Specifically:
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Refund Approved: Code 846 is the IRS confirmation that after reviewing your return, your refund amount has been authorized.
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Payment Date: The date next to your 846 code indicates when the refund was scheduled to be paid by direct deposit or check.
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Refund Delay Factors: Even after 846 approval, additional refund delays are possible if you claimed certain credits like the Earned Income Tax Credit.
Based on my experience, think of an 846 code as the “green light” for your refund. Seeing it means the IRS finished reviewing your return and has no issues with releasing your payment.
But this doesn’t necessarily align with the money hitting your bank account.
Estimating Refund Arrival After Code 846
The million dollar question is how long after your 846 approval will you actually get your cash?
Unfortunately there is no guaranteed delivery date, but here are some general guidelines I’ve uncovered:
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Direct deposit refunds: Expect the money 1-3 business days after 846 for a refund sent by direct deposit.
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Paper check refunds: Allow 3-6 weeks for a paper check to arrive by mail after seeing code 846.
I know, it’s a huge gap! But check delivery involves more manual processing like printing and postal mail transit time.
To get your money faster, I always recommend setting up direct deposit when you file your taxes. According to IRS data I reviewed, over 90% of refunds are sent electronically, so you’ll be joining the majority of taxpayers.
Other Factors Impacting Refund Timing
While code 846 is a great sign your refund is on the way, here are some other factors that can impact timing:
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Additional tax credits: If you claimed credits like the Earned Income Tax Credit, Child Tax Credit or others, it can delay release of your full refund for further verification even after 846 approval.
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Prior year tax debt: If you owe back taxes or other debts like student loans, the IRS can offset your refund to pay the amounts due. Pending offsets will delay release of your refund.
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Amended returns: For returns amended with a Form 1040X, code 846 reflects approval of the additional refund beyond your original amount. So your total refund timing will lag amended processing.
The takeaway here is that while 846 means your IRS refund approval is secure, the actual delivery may take a bit longer depending on your specific tax situation.
Code 971: Uh Oh, the IRS Wants to Talk!
In contrast to the celebratory 846, a 971 code on your transcript means the IRS sent you a notice in the mail.
Seeing code 971 is usually no cause for panic. But you should review any notice promptly to understand what additional information the IRS needs and respond accordingly.
Here are the most common 971 notice reasons:
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Tax return adjustments: The IRS may be adjusting your return which could increase or decrease your expected refund. They are required to send taxpayers a notice explaining any changes.
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Additional information needed: Before releasing your refund, the IRS may need you to supply additional documents or information that supports items claimed on your tax return. This can range from W2s to complex investment details.
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Changes to your tax account: A 971 notice may inform you that the IRS made corrections or changes to values reported on your account, such as modified income calculations or tax liability.
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Refund hold: If the IRS is holding your refund pending further review like an audit, they will send a notice indicating the reason for delay.
For any IRS notice, thoroughly review the letter to understand what response is required from you, if any. Notices with a 971 code usually request return information or confirmation within 30 days.
Taking prompt action minimizes how long your refund remains held up!
Common Scenarios: Code 971 and Code 846
Now that you understand the meaning behind codes 846 and 971, let’s discuss common scenarios where you could see both on your transcript:
You get a CP05 Notice
One of the most frequent notices tied to code 971 is the CP05. This indicates the IRS needs more time and they will closely review your return before issuing any refund.
Once their review is complete, they will send notice 971. When your refund is finally ready for release, you will see code 846.
From my research, allow 2-3 weeks after responding to a CP05 notice beforeanticipating your 846 approval.
You Claimed Earned Income or Child Tax Credits
Due to high fraud rates, returns with these credits undergo increased scrutiny. Expect a 971 notice about the review delay, potentially requesting documentation.
Once the credits are verified, the IRS will approve your refund with code 846.
You Made a Mistake on Your Return
Even simple math errors can lead to the IRS automatically fixing your return, triggering a 971 notice.
Again, you will see 846 after corrections are complete and your refund is cleared for release.
For minor mistakes, it may take just 1-2 weeks after a 971 notice before code 846 appears.
Pro Tips for Codes 971 and 846
If you see one of these codes on your transcript, here are my top recommended actions as an analyst:
For Code 971:
- Read any IRS notice thoroughly and highlight requested actions
- Respond to requests for additional information by deadlines
- If you need to supply documentation, gather it quickly
- Consider amending your return if you discover legitimate errors
For Code 846:
- Circle the 846 date as your tentative refund delivery date
- Monitor bank deposits or mail if paper check expected
- Check “Where’s My Refund” for updates if refund seems delayed
- If it has been over 2-3 weeks from 846, contact the IRS
Following these steps helps get you answers when transcript codes arise during refund processing. Don’t let them stay a mystery!
Parting Thoughts
Dealing with the IRS strikes fear into all our hearts. But knowledge is power when it comes to understanding codes on your account transcript.
While a 971 notice can be intimidating, it is often just a standard delay or request for information. Stay calm, review carefully, and respond promptly.
And code 846 deserves celebration because it means your refund has cleared the IRS gauntlet!
Armed with the inside scoop on these two common codes, you can decode your transcript. And take proactive steps to get your refund safely to your bank account.
Let me know if you have any other tax code questions! I’m always happy to leverage my inner data nerd to demystify the IRS maze.
