IRS Code 570: Impact on Refund and Next Steps Explained

IRS Code 570 on Your Transcript: What It Means for Your Refund & How to Proceed

Checking your IRS transcript and finding an unfamiliar code can be unsettling, especially when you’re anticipating a tax refund. If you’ve discovered IRS Code 570, you’ve likely noticed that your refund process has stalled. This code signifies a pause, a moment where the IRS has put a temporary hold on your account. While it’s natural to feel concerned, this code is not a cause for alarm. It’s an indicator that your tax return requires further review before processing can be completed. Understanding what this code means and the steps you need to take is the first step toward resolving the issue and releasing your frozen refund.

The Surprise of a Frozen Refund: What Code 570 Signifies

At its core, Code 570, often described as "Additional Account Action Pending," means the IRS has stopped processing your tax return. This freeze is put in place to allow an IRS employee or an automated system to review something on your return that doesn't align with the information they have on file. It could be a simple data entry error, a discrepancy in reported income, or a question about a credit you claimed. The key takeaway is that your refund is temporarily on hold, but it doesn’t automatically mean you’ve done something wrong or that you won’t receive it.

What This Article Will Cover: Clarity and Actionable Steps

This guide is designed to demystify IRS Code 570. We will walk you through how to identify this code on your tax transcript, explore the common reasons it appears, and explain its relationship with other IRS codes, like Code 971. Most importantly, we will provide a clear, step-by-step action plan to help you navigate the process, respond to any IRS inquiries, and understand what to expect as you move toward a resolution. Our goal is to empower you with the knowledge to manage this situation confidently and efficiently.

Understanding Your IRS Transcript: Pinpointing Code 570

How Code 570 appears on an IRS account transcript.

Your IRS transcript is the most detailed record of your tax account activity for a specific tax period. While tools like the "Where's My Refund?" app provide a high-level status, the transcript offers a behind-the-scenes look at the processing of your tax return, complete with transaction codes that explain each step.

What is an IRS Tax Transcript? Your Financial Story at a Glance

An IRS tax transcript is a summary of your tax return information. There are several types, but the "Account Transcript" is the most useful for tracking refund status. It lists various transactions on your account, such as the date your return was received, payments made, and any adjustments. Each transaction is assigned a specific code, and understanding these codes is essential to deciphering your return's journey through the IRS system.

Identifying Code 570 on Your Transcript: Where to Look

When you view your Account Transcript online, you will see a list of transactions with corresponding dates and amounts. Code 570 will appear as a line item in this list. You will see "Code 570" in one column, followed by a description like "Additional account action pending," a date, and a monetary amount, which is often $0.00. This entry on the current status code line indicates the point at which your refund was officially put on hold.

The Meaning of Code 570: A Temporary Halt to Your Refund

The official meaning of Code 570 is that a hold has been placed on your account. This prevents your refund from being issued until a potential issue is resolved. This is a standard internal procedure the IRS uses to ensure accuracy. It acts as a system-generated pause, flagging the account for review before any final determination is made or money is sent out. The hold itself is neutral; it is simply a signal that more investigation is needed.

The "Future Date" Explained: What This Date Implies for Your Refund Status

Next to Code 570 on your transcript, you will see a date. This date is often a source of confusion. It is not a deadline for you, nor is it the date your refund will be issued. Instead, this future date is an internal IRS processing deadline. It represents the date by which the IRS expects its system to either automatically resolve the issue or forward it for manual review. If the issue is resolved by this date, the hold may be lifted. If not, further action will be required.

Amounts Associated with Code 570: Potential Changes or Just a Hold?

Often, the amount listed next to Code 570 is $0.00. This simply indicates that a hold has been placed without an immediate change to your tax liability. In other cases, you might see an amount that corresponds to the total tax on your return or a specific credit being questioned. This does not mean you owe this amount; it’s the figure that is under review. The hold is in place to verify this specific part of your tax return.

Why Has Code 570 Appeared? Common Triggers for a Refund Freeze

The IRS uses automated systems to cross-reference the information on your tax return with data from employers, financial institutions, and government agencies. A Code 570 is triggered when a mismatch or a specific condition is detected.

Identity Verification Holds: Confirming Your Identity

One of the most common reasons for a hold is to prevent tax-related identity theft. If the IRS system detects unusual activity or inconsistencies with your filing history, it may issue a Code 570 to freeze the account. This pause allows the IRS's Taxpayer Protection Program to verify that you are the one who actually filed the return. You may be asked to verify your identity online or by mail. For victims of past identity theft, using an Identity Protection PIN (IP PIN) is crucial to avoid these delays.

Discrepancies Between Your Tax Return and IRS Records:

The IRS receives information returns (like W-2s and 1099s) from employers and payers. If the income you reported on your tax return does not match the information the IRS has on file, a Code 570 will likely appear. This could be due to a forgotten 1099, a typo in your reported wages, or an employer submitting incorrect information. The IRS places a hold to investigate the discrepancy before processing the refund.

Review of Specific Tax Credits:

Claiming certain tax credits can also trigger a review, especially if your eligibility information is incomplete or differs from previous years. The Earned Income Tax Credit (EITC) and the Child Tax Credit are common examples. The IRS may need to verify the eligibility of dependents or confirm your income falls within the required thresholds. This review is intended to ensure these refundable credits are issued correctly, placing a temporary hold while they check the details.

The Connection: IRS Code 570 and Code 971

Code 570 rarely appears in isolation. It is typically followed by another important code: Code 971. Understanding how these two codes work together provides a clearer picture of the IRS's process and what you should expect next.

What is Code 971? A Notice of Proposed Adjustment or Action

IRS Code 971, "Notice Issued," is a confirmation that the IRS has sent you a letter or notice through the mail. This notice will explain why your account was put on hold (the reason for the Code 570) and will detail what, if anything, you need to do. This correspondence is the IRS's official method of communicating the issue to you.

How Code 570 and Code 971 Often Appear Together: An IRS Notification Cycle

The typical sequence on a tax transcript is Code 570 appearing first, followed shortly by Code 971. The date next to Code 570 indicates when the hold was placed. The date next to Code 971 indicates when the IRS mailed the notice to you. Seeing both codes is a sign that the process is moving forward. The hold (570) is in place, and the explanation (971) is on its way to your mailbox.

Understanding the Impact: Potential for Additional Tax or Refund Adjustments

The notice you receive may propose an adjustment to your tax return. For example, if the IRS disallowed a credit or found unreported income, this could result in an additional tax liability, which would reduce your expected refund or even create a balance due. In other cases, the notice may simply be a Request for Supporting Documentation to verify a claim. This could be a precursor to a legal deficiency notification if the issue is not resolved.

Navigating Code 570: Your Step-by-Step Action Plan

Seeing a Code 570 can be stressful, but having a clear plan can reduce the taxpayer burden and lead to a faster resolution. Follow these steps to address the situation methodically.

Step 1: Don't Panic! Understanding the IRS Process

First, remember that Code 570 is a procedural hold, not an accusation of wrongdoing. Many issues are minor and can be resolved quickly, sometimes even automatically by the IRS system. Panicking or ignoring the issue will only cause further delays.

Step 2: Check for IRS Mail Immediately:

Since Code 570 is often paired with Code 971, the most critical action you can take is to monitor your mail closely. The IRS will send a physical letter to the address on your tax return. This letter is your key to understanding and resolving the problem.

Step 3: Carefully Review the IRS Correspondence:

Once the notice arrives, read it thoroughly. It will explain the specific issue, such as a discrepancy in income, a question about a credit, or a need for identity verification. The letter will also provide clear instructions on what you need to do next.

Step 4: Promptly and Accurately Respond to Correspondence:

Timeliness is crucial. Your reply to correspondence should be sent by the deadline specified in the notice. Ensure your response directly addresses the questions asked. A clear and concise response to mail received is more likely to be processed quickly by the IRS Accounts Management department.

Step 5: Gather All Necessary Supporting Documentation:

The IRS notice may include a Request for Supporting Documentation. Gather any required documents, such as pay stubs, receipts for deductions, or proof of eligibility for credits. Make copies of everything you send to the IRS for your records.

Step 6: Utilize IRS Online Resources:

You can continue to monitor your tax transcript through your IRS online account. Look for updates or new transaction codes that indicate progress. Your online account is also where you can respond to certain notices or verify your identity if required.

What to Expect Next: The Resolution Process and Your Refund

After you've responded to the IRS, the next phase involves waiting for the review to be completed. Understanding the general timeline and what to look for on your transcript can help manage your expectations.

The IRS Review Period: Understanding the Timeline for Resolution

The time it takes to resolve a Code 570 hold can vary significantly, from a few weeks to several months. A simple issue might be fixed within 30-60 days after you respond. More complex cases can take longer. If you face a significant financial hardship due to the delay, you may seek TAS help from the National Taxpayer Advocate service.

Changes on Your Transcript: What to Look for

A positive sign of resolution is the appearance of new codes on your transcript. Code 571, "Resolved additional account action," signifies that the hold has been lifted. You may also see Code 846, "Refund Issued," which is the final confirmation that your refund is on its way. This is the correct status code you want to see. If you disagree with an IRS adjustment, you have rights, including Appeals by taxpayer request or filing taxpayer petitions.

Conclusion

Encountering IRS Code 570 on your tax transcript can be an unexpected and stressful experience, but it is a manageable one. This code is simply a signal that your tax return requires additional review, serving as a temporary pause, not a final judgment. The key to a successful resolution lies in a proactive and informed approach. By understanding that Code 570 is often followed by a Code 971 notice, your most important first step is to diligently check your mail for official IRS correspondence.

Once you receive the notice, a careful review and a prompt, accurate response with any requested documentation are critical. Remember your rights under the Taxpayer Bill of Rights, and know that resources are available. For persistent issues, Taxpayer Assistance Centers and the National Taxpayer Advocate Service exist to provide support. By following these steps, you can navigate the process efficiently, work toward getting the correct status code on your transcript, and ultimately resolve the hold on your refund.