As soon as the tax season hits every year, the series of guesses and questions games start in mind and discussions of millions of American taxpayers and filers. Whatever the case, the most asked questions are about refund amount, refund dates, and refund-related queries.
However, another thing that is a point of worry for many is the IRS codes that might appear on the tax transcripts. Whether it’s 806, 846, or 150, the taxpayers are asking what these digits mean in their tax transcripts and what they should do about the codes.
A common concern for most American tax filers in 2022 is the appearance of Code 150 on the official tax transcript. Is it a credit or debit? Does it mean liability has arisen for the return filed? And many other questions followed.
In this article, we will answer what IRS Code 150 means, what is IMF of the IRS is, and how to understand Code 150 mentioned on the tax return. We will also try to answer all questions of American taxpayers related to the tax code and tax code system of the IRS. So let’s get into it.
What Is IMF?
Internal Revenue Service has its own definitions and acronyms to determine things and systems. Similarly, IMF and BMF are terms defined by the IRS according to their own system. IMF is not International Monetary Fund when we are talking about the IRS.
Why are we discussing IMF?
IMF is the system that describes the codes that appear on the IRS Tax Transcript. IMF stands for Individual Master File, and the IRS United States uses it for storing and processing tax submissions. Besides, the IMF helps the IRS be used as the main data input and run every individual taxpayer’s record of tax transactions and events.
Whether refunds, penalties, taxpayer status, payment, liabilities, or whatever, IMF guides the IRS to record the data correctly.
IMF, as the name suggests, relates to Individual Taxpayers. BMF(Business Master File) is the system that is the counterpart of IMF and is used by the IRS for recording transactions and data related to business entities and bodies other than individuals. IMF keeps a record of every taxpayer by name, TIN(Taxpayer Identification Number), income, deductions, address, payments & refunds, etc.
What Is Code 150 Appearing On Transcript?
Now to the real question about Code 150 appearing on your tax transcript after filing your tax return for the year 2021.
Why is it there?
You will have noticed that a text is written against Code 150. It says,
“Return Filed & Tax Liability Assessed On Your Tax Transcript”
The actual point of concern for millions of Americans is not the code itself but the text against it. As the word Liability assessment has been used in the text, many people think it might signify some liability on their part.
So, no guesses. We will explain it to you.
When you refer to the Master Files related to Individual returns, Code 150 has three implications. We will state each one of them. And the interpretation of code 150 appearing on your tax transcript defines the meaning.
Code 150 with a statement as mentioned above will appear on the tax transcript in three instances:
- When IRS prepares a substitute tax return
- When you file the tax return
- When a Tax return is filed and is subjected to quick assessment.
Every instance has its own interpretation.
Substitute Tax Return Prepared By IRS.
When it appears on your tax transcript “Substitute Tax Return Prepared By IRS,” it means that a tax liability assessed from the original return establishes a tax module. It signifies that the tax filer has not filed a tax return for more than 12 months.
In that case, IRS files a substitute return on behalf of the non-filer. In that case, the tax liability is usually higher, and it also includes the penalty plus interest for not filing the return. And when the IRS files the return, they won’t bother to report maximum deductions and credits on the return.
IRS uses the information from Form W-2 and 1099 of the individual to prepare the return according to the available data.
This scenario is not very common, and most tax filers will not receive this message on their official tax transcripts if they file the tax return yearly.
Tax Return Filed
It’s the most common scenario that concerns the taxpayers. When a tax filer submits his return to the IRS, electronically or by mail, the official transcript will be updated with Code 150 stating Tax Return Filed.
What does it mean in the dictionary of the IRS?
It implies that
“This TC 150, when posted to the Entity Transaction Section, indicates the Master File Entity was created from the posting of return.”
In simple terms, it’s the acknowledgment of a tax return filed by the tax filer. There’s nothing to be worried about the entry appearing in your tax transcript.
Tax Return Filed –Quick Assessment
When you file a tax return, the IRS will perform a quick assessment to ensure that you have filed everything correctly. After the assessment, the status is updated to the Tax Return Filed –Quick Assessment with an updated assessment date.
FAQs About Tax Code 150
Is Tax Code 150 A Debit or Credit To Your Account?
Tax Code 150 doesn’t signify anything like a debit or credit balance of your tax liability or refunds. It’s just the transaction code used by the IRS to show that a tax return has been filed by the taxpayer and is under assessment by the IRS. There is nothing more that you can add to the meaning of Code 150.
What Does “Entity Created by TC 150” Mean On Tax Transcript?
Entity Created by TC 150 is a self-explanatory code as TC stands for Transaction Code. TC 150 means that the entry related to the filing of tax returns has been created. Nothing more, nothing less!
What Do I Do If I Have Code 150 On My 2021 IRS Tax Transcript?
You have nothing to do about Code 150 appearing on your tax transcript. However, if the description says ‘Substitute Tax Return Prepared by the IRS,’ it means that you will owe a higher tax and penalties for not filing the return for more than 12 months.
How Long Will It Take To Get a Refund After Code 150 Appearing On My Tax Return?
If you were expecting a refund after filing your tax return and Code 150 is appearing on the tax transcript, you have to look at the IRS Cycle Code. It represents that the return has been acknowledged by the IRS and is under processing. You must wait for Code 846(refund) to appear on your tax return.
What to do if you have Code 150 Credit on your 2021 IRS Tax Transcript?
Now you know that Code 150 is just a message that means your transcript is under processing for assessment by the IRS. If you were expecting a refund, you could use the IRS tool ‘Where’s My Refund?’ to track the progress of your return and refund. IRS will notify you if your return needs any revisions or adjustments.
Does Code 150 Mean I Owe?
No, Code 150 doesn’t mean you owe the IRS anything extra. Regardless of your tax liability, credits, etc., Code 150 is used to signify filing of the return by the individual or quick assessment in most cases.
However, if Code 150 states that Substitute Return Prepared by the IRS, it will mean you will pay the penalty for not filing a return in the last 12 months or more. How many penalties, when, or final decision about it can be taken by the IRS only, and they will notify you when it’s due.
Should I Worry About Tax Topic 151?
No, you should not worry about seeing Tax Topic 151 but wait for an official notification or letter from the IRS before proceeding things forward.