Why Did My 2024 Refund Go Down After The IRS Adjusted My 2023 Tax Return

Many tax payers are seeing the following startling messages on WMR or IRS2Go when they go to check the status of their refund. Naturally their reaction is one of shock, followed by frustration and anger.

These notifications are to inform tax filers about adjustments the IRS automatically made that either reduced or eliminated their entire refund.

IRS refund adjustment
IRS refund adjustment (RRC)

So, I am beside myself. Is this real life???? Am I really not getting a refund? Does anyone know what I should do?

IRS refund adjustment screrenshot
IRS refund adjustment

These messages or similar ones are primarily due to incorrectly claimed credits or adjustments to the amount a tax filer is eligible for due to a change in income, filing status or dependents claimable.

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Can I get more details from my transcript?

One way to find out more about these adjustments, prior to getting an official IRS notice, is to review your (free) IRS transcript.

This will show you the transaction(s) the IRS has made or is making, that is likely holding up your refund payment for the current tax season.

You may see the following series of transcript transaction codes (TC), that indicate why and how your refund was adjusted. Here is what these codes mean, for the 2022 dated items (always look for current tax season dates).

IRS Tax Transcript Transaction Codes (TC)
IRS Tax Transcript Transaction Codes (TC)

Code 766 refers to the refundable credits applied to your account. These include the stimulus check related recovery rebate credits (RRC) and remaining advance child tax credits (CTC). A negative number for these credits means an amount owed to you and will increase your refund.

Code 971 refers to an IRS notice issuance, which is normally accompanied by Code 570 (IRS adjustment) or Code 898 (Refund Offset – Topic 203).

TC 570 in the example above, is reflective of a general hold on your account and potential refund adjustment on your transcript that covers many factors, such as a mismatch with employer reported wage income, injured spouse claims, or issues with reconciling refundable tax credits (like the EITC, RRC or CTC) claimed in your tax return versus what the IRS has on record.

Once the IRS has made the adjustment and released your refund payment you will see code 846, which indicates your refund has been issued.

The date on the TC 846 line should be the date your refund is estimated to be paid.

When will I get an IRS notice to see what happened?

IRS notice with adjustment details
IRS notice with adjustment details

Yes. The official notice or letter you get (normally Letter 525) will explain why the IRS made changes and details behind the adjustment. You will also have an opportunity to appeal (within 30 days) if you do not agree with the proposed adjustments.

Otherwise, if you agree with the adjustment, sign and return the agreement form to the noted address on the letter. This will eventually show as TC 571 on your transcript, and could be after your refund issued date.

In recent tax seasons, incorrect or duplicate claims for the RRC and CTC were the main reasons tax filers are seeing these codes and facing extended refund payment delays.

IRS Adjustment Notice for Recovery Rebate Credit
IRS Adjustment Notice for Recovery Rebate Credit

Other items causing refund adjustments

The following are some of the items folks are reporting around why their tax refund is being adjusted.

The IRS changed credit amounts you claimed because your income (AGI) disqualified you from them. This has happened to a lot of people this year since credit qualification was based on 2021 income, and not 2020 income when paid last year. Make sure you look back, especially if you have more income last year.

Incorrect Information in Tax Filing

Also check your tax returns and make sure your wages and withholding match your employer’s W2. Make sure dependents SSNs and last names are correct. If it looks ok then send all that info back when you get the IRS notice to confirm eligibility for dependent or child payments.

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