You've been waiting for your tax refund, but for some reason, it hasn't arrived yet. To check on its status, you head to Where's My Refund on the IRS's website, and after you enter your details, the system says Tax Topic 151. Or maybe it says Topic 151 with reference number 1242.
What does this mean? What's happening to your tax refund? How do you get more information? Unfortunately, the internet is littered with unclear or downright incorrect information about this topic. A lot of websites call Tax Topic 151 an IRS letter. This is not correct. Topic 151 is a reference to your appeal rights that you see on your online account when the IRS is revision your tax return, and this is typically followed by a letter about the issue.
Why do so many of the top tax resolution websites have this wrong? Because many content writers just regurgitate the "facts" on top websites. They don't do their own research. TaxCure writers, in contrast, dig into IRS manuals and tax codes. They don't spin content from other sites.
Even the IRS's website doesn't have many details about this topic. To help you out, we have put together some information to de-mystify this topic. However, it's important to note that these topics can have a few different implications. If you want to talk with a pro directly, use TaxCure to search for an experienced local tax professional in your area.
What Does Tax Topic 151 and Reference 1242 Mean?
If you see these numbers on the IRS's website, it means that the IRS has selected your tax return for a review, and if you don't like the results of the review, you have the right to appeal.
Why doesn't the IRS just come out and say that they're reviewing your tax return? Why do they use these confusing codes? Ultimately, that's anyone's guess, but the vague codes may be due to the fact that there are so many different reasons to review a tax return.
When real taxpayers discussed this topic on Reddit, they cited a variety of reasons for these codes. The IRS reduced some of their refunds for improperly claimed credits and held some refunds for unpaid child support. In some cases, users got these codes because they needed to verify their identity before the IRS was willing to send out the refund. The following sections outline more details about each of these issues.
What Is Tax Topic 151?
IRS Tax Topic 151 explains your appeal rights. If the IRS makes changes to your tax return, the IRS will send you a notice outlining the changes, and then you have a chance to appeal or dispute the changes. During the appeal, you will explain your side of the story and present documents to make your case.
However, when most people first see Tax Topic 151, they have no idea what they need to appeal. For some reason, the IRS attaches this number to tax returns before letting people know what happened.
But here's an example of why that happens. Imagine that you file a tax return and you claim a credit for your step-child. However, one of the child's other parents also claims the credit. Before releasing your tax refund, the IRS pulls your return for additional review, and the agency marks your online account with Tax Topic 151 and reference number 1242. Note this is just an example of what could happen. In this exact scenario, the IRS may decide to use a different code.
You aren't quite sure what's happening, but a few weeks later, you receive a notice from the IRS. The notice explains that the IRS adjusted your refund and why. Now, here's where your appeal rights come into play. You now have the chance to reach out to the IRS and appeal the changes.
How to Appeal Changes to Your Tax Return
Note that appealing tax changes can be challenging. You need to provide the IRS with documents that support your case. You may also have to back up your interpretation of the tax law. For best results, you may want to work with an Enrolled Agent, CPA, or tax attorney if you need to appeal an IRS action.
What Is Reference Code 1242?
Often paired with Tax Topic 151, reference code 1242 means that the IRS has selected your return for further review. This code applies to returns that have been e-filed at least three weeks ago. The code indicates that the IRS has frozen your return for review, and the agency will send you a notice later.
In some cases, you may see code 1262, which also means that your refund has been frozen pending review. If you filed a paper tax return by mail, you may see codes 1241 or 1261 which also indicate a refund frozen for review. If you see code 1341, that specifically means that your refund was frozen due to a liability owed on another account (such as child support).
With all of these reference codes, the agency will not send out your tax refund until it completes the review of your tax return. Often (but not always), this is due to a federal offset.
What Is a Refund Offset?
A refund offset is when the IRS takes some or all of your refund to cover another debt. For example, if you owe child support, the agency will seize some of your refund. Offsets can also happen if you have to repay unemployment benefits or if you owe state income tax.
Other Reasons for Tax Refund Reviews and Delays
The Treasury Offset Program (TOP) allows the IRS to seize tax refunds for unpaid state and federal debts, including child support and unemployment benefits. However, if you haven't filed a federal tax return in one of the previous years, the agency may also hold your refund.
In this case, the IRS cannot seize a specific amount of your refund right away. Afterall, the agency doesn't know how much tax you may have owed during the years you didn't file. However, the agency may hold your return, generate a substitute for return, and then, assess that tax due against you.
The IRS may also delay refund processing if it believes that someone has committed identity theft on your account. Thieves commit identity theft by filing tax returns in victims' names and then directing the refunds to their own bank accounts or PO boxes. If you haven't filed a tax return in a while or there are other suspicious issues with the return, the IRS may pull it for review and pop on the 151 and 1242 codes.
If you see one of these codes, you really just need to wait for more details. However, if the IRS's website indicates that your return has been processed and sent to you, you may want to start a refund trace.
Does This Mean the IRS Is Auditing My Tax Return?
Tax Topic 151 does not usually mean that your return is being audited. According to several Reddit users, the IRS said they were not being audited when they called to ask about this code.
However, a Topic 151 review may have similar elements as an audit. In some cases, the IRS may complete the review and send your refund as usual. In other cases, they may adjust your return or ask for additional information. Providing additional information is similar to the beginning of the audit process.
What Should I Do If Where's My Refunds Says Tax Topic 151?
To get more info on the situation, you should call the IRS directly or just wait for a letter. If you call, have a copy of your tax return and your personal details ready. Many taxpayers report that after they called, the IRS said that they would send a letter within nine weeks.
When Will the IRS Contact Me?
Typically, the IRS should contact you within about two months of freezing your tax refund. However, the process can take longer. If the IRS doesn't dispatch your refund within six months after you file, you have the right to pursue the matter in Tax Court.
What If I Don't Agree With the IRS's Changes?
Let's say you wait a couple of months, and then, you finally receive a letter from the IRS about the situation. The letter explains why the agency changed your refund, but you don't agree. Now, here's where your topic 15 appeal rights come in — you get to appeal the findings in the letter. Pay close attention to the deadline on the letter. There are strict timelines for IRS appeals.
How to Resolve Tax Topic 151 and Reference 1242
Unfortunately, this resolution starts with a big waiting game. You can refresh the Where's My Refund tool once a day to see if the IRS has updated your file, and you can watch your mailbox for a letter. If you get tired of waiting, you can hire a tax pro to call the IRS and figure out what's happening. They can also help you initiate a refund trace if applicable.
Alternatively, you may want to reach out for help once the agency finally sends you a letter. At that point, you'll know exactly what's happening, and you can easily take action. To get help now, use TaxCure to search for a tax resolution specialist. If you're also dealing with issues with your state tax refund, you may want to look for a pro who's based in your local area. Then, they'll have state-specific experience as well.
It can be really frustrating to wait for a tax refund. But there's one silver lining — if the IRS takes more than 45 days to send out your refund, the agency has to pay you interest. So, that helps to boost your tax refund at least a bit (even if you did lose some of the refund to an adjustment.)
Tax Topic 151 Vs. Tax Topic 152
Both Tax Topic 151 and 152 are statuses that you may see when you sign into "Where Is My Refund". They both indicate delayed processing times, but they're slightly different. As explained above, Tax Topic 151 generally means that the IRS is reviewing your tax return. Tax Topic 152 just means that the IRS is processing your return. Usually, this status indicates that your return has been delayed due to a processing issue, but if the IRS sees any issues during processing, the agency may decide to review the return. Then, the status may be changed to 151 or a more precise topic.
