IRS Codes 570 and 971 often make taxpayers panic, especially if they’ve been waiting weeks for their tax refund before these codes pop up on their transcript. If you checked your tax transcript looking for a simple answer regarding your tax refund, only to find these codes, you’re not alone.
While these codes may seem serious at first, they are often just a routine part of IRS processing. Code 570 indicates that there is a hold on your refund or account while the IRS reviews your account, while Code 971 means that the IRS will be sending you a notice about your account.
These codes can often resolve on their own, but if they don’t, you may have to provide additional information or clarification. And if these codes are the result of more serious tax problems (for example, delinquent tax debt, intercepted refunds, or an audit), having the right professional support is important. Call Seattle Legal Services to learn how we help with unpaid taxes.
Key Takeaways
- Code 570 indicates a refund hold or account freeze.
- Code 971 generally means that the IRS has issued or will issue a notice.
- These codes together may mean that the IRS is reviewing something prior to releasing a refund.
- Some cases resolve automatically; others require action, depending on the issue the IRS is reviewing.
What Do IRS Codes 570 and 971 Mean Together?
It’s very common for these two codes to appear together on an IRS transcript. Together, they basically mean that the IRS has temporarily paused processing of the taxpayer’s refund and that the taxpayer will receive a notice in the mail shortly.
- Code 570 means that the IRS has frozen the account or paused refund activity.
- Code 971 means that the IRS is sending (or has already sent) a notice.
These numbers often appear together when a taxpayer has filed their return, and the IRS has uncovered a routine issue or something that warrants further review. Taxpayers often notice an issue when they check the “Where’s My Refund?” tool and only receive vague updates or no updates at all.
Unfortunately, these codes don’t tell you what notice the IRS is sending or why they are reviewing your account – so many people assume the worst from these codes, worrying that they are being audited or that the IRS is seizing their refund.
It’s important to be aware of those risks, but let’s take a closer look to see what these codes mean.
What Does IRS Transcript Code 570 Mean?
IRS Transcript Code 570 can signal a routine problem that will self-resolve, but it can also be indicative of a deeper problem that may warrant a tax attorney. Routine issues that may cause Code 570 to show up on your transcript include:
- Manual IRS review
- Processing backlogs
- Delays in wage verification
- Identity verification requests
- Refundable credit reviews
- Minor inconsistencies that have to be verified
These issues are common during busy filing seasons, particularly for returns involving the Earned Income Tax Credit or Child Tax Credit. In these cases, the IRS may pause refunds while verifying information to ensure that they do not pay refunds for fraudulent returns.
If this is the case for you, you may just need to wait for the IRS notice, verify your identity, or provide other requested information, and wait for the IRS to finish processing your refund.
However, there are cases where Transcript Code 570 indicates a more serious problem. That may be the case if you owe the IRS or have years of unfiled returns.
If any of these seem familiar to you, you could be facing a more serious problem. You may owe back taxes, have unfiled returns, have income that does not match what was reported to the IRS, or have more serious fraud indicators on your tax return.
What Does IRS Transcript Code 971 Mean?
Transcript Code 971 typically means that the IRS issued or will issue a tax notice related to your tax account. The notice may explain:
- Why your refund is delayed
- What documentation or information is needed from you
- If identity verification is required
- If there were adjustments made to your return or refund
- If there are additional processing steps required for your refund
Timing can often lead to anxiety here. Taxpayers who are staying on top of their “Where’s My Refund?” status or their tax transcript often see this code before any actual notice has arrived in the mail, giving them time to expect the worst. While the notice may involve important deadlines or demands for documentation, it may also simply be an update that the IRS is verifying information on their account.
Understanding IRS Transcripts
Your IRS transcript is basically a running record of all activity on your tax account. It includes information on your filed returns, payments, refund activity, IRS notices, account adjustments, and transaction codes.
Your transcript does not include detailed information, though – while it will give specific codes that allow you to see what’s going on with your account, it does not tell you exactly why those codes are there.
Common Underlying Issues Behind Codes 570 and 971
There are several underlying tax problems that may trigger Transcript Codes 570 and 971.
Income or Withholding Mismatches
The IRS compares your return to the income information provided by employers, clients, banks, and other companies that issue W-2s and 1099s. If the numbers don’t match, the IRS may freeze the refund until they finish investigating the discrepancy. If you aren’t withholding enough to cover your tax liability, the IRS may send a lock-in letter to increase withholding.
Identity Verification Problems
The IRS is very careful about identity fraud and any red flags that may signal identity theft. If there’s anything that doesn’t match, they may pause the process until they can verify the taxpayer’s identity.
Unfiled Tax Refunds
If you have unfiled returns from previous years, the IRS may freeze your refund. You may still owe taxes from previous years, and the IRS may not release your refund until you address the issue.
Escalating Tax Debt or Refund Offsets
If a taxpayer has back taxes, child support debt, state tax debt, or debt with other federal agencies, their refund may be frozen until the IRS figures out how the refund is meant to be applied to those debts. The IRS may offset part or all of the taxpayer’s refund to cover outstanding balances.
Warning Signs the Situation May Be Escalating
While it’s not good to assume the worst when your refund stops processing, you also don’t want to ignore the situation or assume it’s minor. If your tax situation is escalating and may require intervention, you may notice these red flags:
- No transcript movement for more than two months
- Missing IRS notices
- Multiple notices arriving in quick succession
- Changes in the amount of your tax refund
- Collection letters
- Warnings of wage garnishment
- Bank levy notices
- Notices sent to your employer or bank
In more serious situations, unresolved tax issues may lead to serious IRS enforcement activity, including refund offsets, Substitutes for Returns, and enforced collection actions.
How Long Do Code 570 and 971 Delays Last?
Delays caused by Codes 570 and 971 can vary widely in duration. In some cases, these matters are resolved in a matter of weeks, and your refund begins processing normally without you having to do anything.
In other situations, the IRS requires more time to investigate, documentation from you, or further information from you. Their investigation can take months, and you may simply have to wait it out. If they need information or documentation from you, the delay is largely dependent on how quickly and accurately you respond.
How to Fix Transcript Codes 570 and 971
There are several steps you can take to address IRS Transcript Codes:
- Read your IRS notice carefully: When the IRS’s notice (as promised by Code 971) arrives, take your time to read it over thoroughly. It will tell you exactly what you need to do, when you need to respond, and the potential outcomes.
- Verify your tax return information: This may be a good time to double-check the information on your tax return, especially if you did not prepare it yourself. Compare the filed return against W-2s, 1099s, withholding amounts, credits, and deductions. Transposed digits or small reporting errors may delay your refund.
- Respond promptly: If the IRS requests information or documentation, respond to them right away. The sooner they get the information they need from you, the sooner your refund will continue processing.
- Monitor transcript activity: Keep an eye on your transcript for new codes, dates, and adjustments that may either provide clarification or let you know that your refund is back on track.
- Contact the IRS if necessary: If weeks pass and you still don’t receive a notice from the IRS or you don’t understand your notice, you can always contact the IRS directly. If it’s during peak tax filing and refund season, though, expect long waits.
When DIY Solutions Stop Working
There are many tax situations that are simply too complicated to handle on your own without risking further issues. It may be time to talk to a tax professional if:
- Multiple tax years are involved
- IRS notices conflict, never arrive, or are unclear
- The IRS has started collection activity against you
- Wage garnishment and levies are threatened
- You owe a significant amount of money
- The IRS suspects identity theft
- There are issues with your self-employment income
- You are being audited
In these cases, working with an experienced tax professional at Seattle Legal Services can help you identify the real issues behind your transcript codes and take steps to resolve them.
Frequently Asked Questions
What does IRS Code 570 mean on a transcript?
This code means that the IRS temporarily froze the processing of your return or placed a hold on your refund while they review your account.
What does IRS Code 971 mean?
Code 971 on your transcript means that the IRS has sent or plans to send a notice to the taxpayer regarding their account.
Why do Codes 570 and 971 appear together?
These codes often show up on returns because the IRS has paused processing and intends to send the taxpayer a notice about their review of the account. The notice may also request additional information before the IRS proceeds.
Does Code 570 mean I am being audited?
No. Code 570 may come before an audit if the IRS’s review finds discrepancies, for example, if you have unreported crypto income. However, Code 570 often just indicates that the IRS is doing a routine verification of your account or reviewing information that was flagged by their system.
How long does it take for Code 570 to resolve?
This code resolves within weeks for many taxpayers, but some see it on their transcript for months before the issue is handled.
What should I do if I didn’t receive an IRS notice?
If you wait several weeks after seeing Code 971 on your account and you don’t get a notice from the IRS, you may wish to call the IRS about your account.
Can the IRS keep my refund for unpaid debts?
Yes. If you have unpaid federal tax debt, your refund may be applied to that. State tax agencies can also intercept federal tax refunds. Child support and other government debts may also intercept tax refunds.
Get Help With Refund Delays and Other Tax Problems
IRS transcript codes can be confusing without context, often leading to anxiety for taxpayers. While Codes 570 and 971 may indicate issues that resolve on their own, they may also be a sign of serious tax problems you need to address.
If you’re unsure of how to proceed or how to tackle your tax problems, it’s time to call the team at Seattle Legal Services. Contact our back tax resolution team online or call us at 206-536-3152 now.
Resources:
https://www.irs.gov/individuals/get-transcript