Are you still waiting for your tax refund?
Many people are, based on questions in Reddit and Quora forums, as well as our own experience with the flurry of calls we’ve been receiving since April here at Alleviate Tax.
Unfortunately, if the Internal Revenue Service flags your tax return for additional review, it can take months to achieve a resolution and receive the money the IRS owes you.
For instance, if your tax return has been flagged for possible identity theft, it can take more than 22 months to resolve your case, according to a news release published at IRS.gov. As of April 2024, the agency had roughly half a million unresolved identity theft cases. Once your case is resolved, it can still take several weeks to receive your refund, the release stated.
If the IRS flags your return for any reason, including identity theft, and you use the IRS Where’s My Refund tool, you may see Code 151 appear as the status of your tax refund. First, understand that Code 151 does not mean you are being audited by the IRS.
It’s absolutely no reason to panic, at all. But seeing this code does mean your tax return might require a little bit of extra attention on your part and, depending on the ultimate outcome, you may want to file an appeal with the IRS.
Read on as we dive deeper into the possible meanings if you receive a notice describing Tax Topic 151. We will show you how you can file an appeal to resolve tax issues if necessary.
What Is Tax Topic 151?
There is a lot of misinformation out there regarding tax topic 151. Code 151 (IRS) does not automatically mean your refund is being offset to cover unpaid debts. It also doesn’t indicate an audit.
Tax Topic 151 is also not an IRS letter. You may receive a letter detailing tax return adjustments, refund offsets, or other reasons your refund is delayed along with information on Tax Topic 151, your right to an appeal. You may see Tax Topic 151 refund information listed as a code in the Where’s My Refund portal. It indicates you have a right to appeal the IRS’ decision regarding your tax refund.
To avoid costly court proceedings, the IRS allows an administrative appeals process. Appeals give taxpayers a right to dispute the IRS decision regarding tax refund adjustments, offsets, or collections actions.
You can appeal penalties, interest abatement denials, liens, levies, rejections of offers in compromise, as well as your tax refund, adjustments to your tax return, or collections actions.
Tax Topic 151 and Accompanying Reference Numbers
If you see Tax Topic 151 on correspondence from the IRS or in the Where’s My Refund portal, it’s likely accompanied by a number that shares more details about your tax situation. Here are a few common numbers that turn up alongside 151 Code IRS.
Tax Topic 151 and Reference 1242
Reports of tax-related identity theft have risen by 45% since the pandemic, according to a report from financial company IPX1031, based on data from the Federal Trade Commission’s Consumer Sentinel Network. If you see tax code 151 accompanied by reference 1242, it means your tax return was flagged for potential identity fraud.
Even if you did all the right things, such as submitting your return electronically over a secure network, using secure passwords, and protecting your personal information, your return may still be flagged for suspected identity theft. In this case, you most likely don’t need to file an appeal.
It will take some time, but you should receive your refund as soon as the IRS sorts out that your return. You may need to provide the IRS with additional information to prove your identity.
Tax Topic 151 and Reference 1262 (Frozen Pending Review)
While code 1242 means your tax return has been held for review, Reference 1262 accompany code 151 means that your tax return has been reviewed but your refund has been frozen pending review. It means you have e-filed your tax return at least 3 weeks prior, it’s been processed, but the Treasury Offset Program has found a need to hold your refund. They might freeze your refund to cover:
- Unpaid child support
- Past-due federal tax debts
- Other federal agency debts
- State income tax debt
- Unfiled tax returns from past years
- Unemployment compensation debts
Upon further review, the agency might determine that you don’t owe any debts and may release the funds, or may issue a refund offset to cover the debts. That’s when you may want to file an appeal.
How to File an Appeal
Before you file an appeal, make sure you have provided the IRS employee that reached out to you with any information requested. Failure to provide requested information may cause the IRS to deny or delay your appeal.
Then, complete your protest and mail it to the IRS address that appeared on the letter you received detailing your appeal rights.
The IRS Examination or Collection office will consider your protest and attempt to resolve the dispute. This is called “alternative dispute resolution.”
Ideally, taxpayers and the IRS want to avoid court cases. Unfortunately, between 2013 and 2022 the IRS used ADR to resolve disputes in less than one-half of one person of cases reviewed by the Office of Appeals.
If they can’t reach a resolution, they will forward the case to the Appeals office, which is the next step before tax court. Unlike the success rates for ADRs, most tax disputes are resolved successfully through negotiation in the Independent Office of Appeals, according to a report from the United States Government Accountability Office (GAO).
Filing an appeal could be the path to get the tax debt resolution you need.
Do You Need a Lawyer to File an Appeal?
You can file an appeal yourself, as long as you are certain you are providing the IRS with all the information required.
You can file a Small Case Request if you are appealing collections action that is less than $25,000 in additional tax, including interest and penalties, for each period that the IRS says you owe, according to IRS.gov.
However, you may wish to hire a tax attorney, tax debt relief specialist, tax accountant or IRS enrolled agent to help you through the appeals process. The process can be long, tedious, and time-consuming. A qualified tax professional understands the paperwork required and the terminology to use to file a successful appeal.
Time is of the essence. If your tax refund is held up and you need that money to pay bills, avoid late payments, or pay off other debt, you’ll want to achieve quick resolution.
The experts at Alleviate Tax are here to help you get the tax debt relief you need. Don’t hesitate to reach out.
FAQs
Is tax topic 151 good or bad?
Tax topic 151 is neither good nor bad. IRS code 151 indicates your right to appeal a decision from the IRS. If the IRS has offset your tax refund to cover past due debts or has frozen or delayed your refund for other reasons, you have a right to appeal through the IRS Independent Office of Appeals.
Does tax topic 151 mean audit?
If you see the code 151 when you check the status of your tax refund, it does not indicate an audit. Code 151 doesn’t usually lead to an audit, either. The IRS is holding your tax return and may require additional information by mail to process the return. The agency may be holding your return because of suspected identity theft, an offset refund, or other reasons.
Does tax topic 151 mean offset?
Tax Topic 151, by itself, does not mean your tax refund is being offset or held to pay other debts. Tax Topic 151 means your tax return is held up for review and it notifies you of your right to appeal if you do not agree with the IRS’ decision.
