IRS Tax Transcript Code 826 Credit Transferred Out – IRS Debt Offset and Smaller Refund

Transaction codes are used on IRS tax transcripts to provide information for tax filers into what is/has happened with their tax return processing, reasons for potential delays, when a refund will be paid or why it is delayed.

Given the long delays in IRS processing over the last few years and challenges in getting through to a live IRS agent, many taxpayers are turning to their free IRS transcript to see what is happened with their tax return processing and potential refund payment.

Tax Transcript Code 826

The IRS tax code 826 reflects that fact that part of your refund was taken out by the agency to pay off an existing or old tax debt.

Code 826 on your transcript

The 1040 201812 code on the 826 memo line reflects that it was a tax debt (Form 1040) and the year (2018) it applies towards.

You will also receive a IRS notice with details on the debt your refund was applied to options you have to appeal it. You will see code 971 on your transcript per screenshot above reflecting this.

Note that you won’t see this code if your refund was adjusted under the Treasury Offset Program, which is specifically for non-IRS debt and WMR will show a specific message around this.

You can see a listing of various IRS tax transcript transaction codes in this article, but I am specifically covering transaction code 826 (TC 826) in this article, which many tax filers see after the IRS has completed processing on their regular or amended return.

Why was my refund lower than expected?

The IRS will generally adjust your refund automatically for the overdue debt and you will see this reflected on your transcript and payment.

You can call the IRS for further details and appeal the adjustment if you feel it was incorrect.

Also note your tax filing software won’t know about this debt (unless you advise of it beforehand) so your estimated refund will be different to your actual refund.

It may also result in you losing your entire refund and on the hook to pay any advance refund loans.

The IRS will apply any refund offsets to your oldest debt first and if your refund is insufficient to cover the loan you may see the same code and treatment in subsequent years, or until the loan is paid off.

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