[IMGCAP(1)][IMGCAP(2)]As part of its efforts to upgrade electronic customer service, the IRS recently gave individual taxpayers online access to their IRS transcripts, which are computer-generated reports that show information on tax filings and IRS account activity. Transcripts can also provide information to help taxpayers resolve many tax notices and issues.
Before the IRS provided this online tool, obtaining IRS transcripts was a manual process for taxpayers. They had to call the IRS, mail in a form, or use an online request for mailed transcripts that typically took at least seven days to arrive. Now, taxpayers can set up a personal account with the IRS to view the five types of transcripts right away.
With this new tool, more taxpayers will be accessing their tax information online and many of those taxpayers will be viewing their IRS transcripts for the first time. Because IRS transcripts are not made for easy interpretation, many taxpayers accessing their transcripts will have more questions than answers.
Be prepared to help your clients understand the information available to them and translate the sometimes cryptic information contained in IRS transcripts. Here are some common questions your clients will have about IRS transcripts, and how you can answer them.
Who can get transcripts online?
The IRS Get Transcript tool is available only to individual taxpayers. Business taxpayers can call the IRS at (800) 829-4933, and tax professionals can call the Practitioner Priority Service at (866) 860-4259, option 4, to request IRS transcripts.
What are the types of transcripts?
There are five types of IRS transcripts, which taxpayers can now access online:
1. An account transcript provides an overview of your account. It shows filings, extensions, withholding, credits and any follow-up transactions on your account, including penalties, assessments, IRS inquiries and other account activity. Basically, if there have been any IRS actions on your account, they will appear on this transcript.
2. A return transcript shows most lines from the original tax return as it was processed. Changes made to the return after it was processed are not reflected, including any amended returns filed. If you need a copy of your tax return for any reason, such as a loan or financial aid application, this is the transcript to use.
3. A record of account transcript is simply a combination of the account and return transcripts. The IRS makes this available because it shows the big picture, from your original return filed to any changes made to the return after processing.
4. A wage and income transcript provides a listing of information statements (Forms W-2, 1099) that show income reported to the IRS under your Social Security number. You can use this transcript to help with your due diligence in filing an extended tax return, verify employment, or keep a personal record of income.
5. A verification of nonfiling letter is a transcript that is automatically produced when the IRS does not have your return on file or has not yet processed your filed return.
What years are available for each type of transcript?
The IRS generates separate transcripts for each tax year. In the IRS Get Transcript tool, each transcript is available as a separate link, listed by tax year. The following years are available for the five types of IRS transcripts:
- Account transcripts: Current tax year and three prior tax years. Older account transcripts can appear if there has been activity within the past three years on the account.
- Return transcripts: Current tax year and three prior tax years. If you don’t see a return transcript available for download, it likely means that no return was filed for that year, or that the IRS has not processed the return.
- Record of account transcripts: Current tax year and three prior tax years.
- Wage and income transcripts: Current tax year and nine prior tax years. In mid-May, wage and income transcripts become available for the previous tax year. For example, 2013 wage and income transcripts will be available in May 2014.
- Verification of nonfiling letter: Current tax year and three prior tax years.
Why don’t my tax return transcript and account transcript reflect the return I have filed?
Your filed return isn’t reflected on your transcripts yet because the IRS has not finished processing the return. Your return should post to your account transcript in about one week. The return transcript takes longer for the IRS to post to your account.
What do the transaction codes mean on my account transcript?
Transcript transaction codes represent actions on your IRS account and provide a literal description of the action. For routine filers with no post-filing compliance activity, account transcripts are typically easy to interpret. However, if you have post-filing compliance activity, such as tax notices and correspondence back and forth with the IRS, transcripts can be confusing. The IRS Transaction Codes Pocket Guide offers explanations for transaction codes, but tax practitioners and taxpayers who use the guide can still misinterpret codes and draw the wrong conclusions.
Some transaction codes are particularly confusing to taxpayers and tax professionals because the IRS uses them to record many types of actions. The two most common examples are Transaction Codes 971 and 290:
- For 2009 returns, the IRS used TC 971 to represent changes made to the first-time homebuyer credit. However, because TC 971 is used for miscellaneous transactions, and the IRS explanation for this transaction code was not updated with tax law changes in 2010, the IRS description stated that there was a challenge to the Earned Income Tax Credit.
- TC 290, “Additional tax assessment,” often appears on transcripts with no additional tax assessment, confusing taxpayers and tax professionals about what is happening on the account.
If you find a confusing transaction code, your tax professional should call the Practitioner Priority Service at (866) 860-4259 to find out what’s actually happening on the account.
Can my account transcript tell me if I am selected for audit?
Every year, the IRS selects millions of returns for examination, but audits only a fraction of those selected. If you see TC 420, “Examination of tax return,” on your account transcript, it doesn’t necessarily mean you’ll be audited. If you’re actually being audited, you'll receive a separate notice from the IRS. Generally, the IRS will initiate an examination within a year after the return is filed.
With limited resources, the IRS can’t help all of the taxpayers who contact the agency with questions. To lighten its customer service burden and meet increasing taxpayer demand for online tools, the IRS will continue to develop and enhance online tools for taxpayers. And, as taxpayers have more access to their online IRS information, they will have more questions for their tax professionals. You can help your clients understand the information on their accounts and reaffirm your role as their trusted tax advisor.
Jim Buttonow, CPA.CITP, is cofounder of Beyond415. He has more than 26 years of experience in IRS practice and procedure. Reach Jim at jbuttonow@NewRiverInnovation.com. Mark Bowles is tax procedures editor at Beyond415 and specializes in tax authorizations and IRS account research. Reach Mark at firstname.lastname@example.org.