After filing your taxes you, like many others, may be eagerly awaiting your tax refund. Maybe you’re frequently walking out to check your mailbox, or you’re visiting the IRS website on a daily basis to check on the status of your tax refund. And then one day, instead of a refund, you get a tax topic 151 notice (otherwise known as IRS code 151) telling you to take action. If you’re wondering what exactly this means—and what you should do about it—then read on, as this article will cover:
- What is Tax Topic 151?
- How to Take Action on IRS Code 151
- What are My Tax Topic 151 Appeal Options?
What is Tax Topic 151?
You may receive a tax topic 151 letter in lieu of a full tax refund, or any refund at all. It can be alarming, as the notice often says to take action immediately. If you’ve received this notice, it means that your tax refund is either being reduced or withheld entirely by the Department of Treasury so that they can use it to pay for things that they believe you owe. This is known as a tax refund offset, and the most common reasons for you getting a tax offset include:
- Unpaid taxes
- Unpaid child support payments
- Federal student loans you took out that have gone into default
In this case, the IRS will simply send a letter explaining why money was deducted from your tax refund or why you received no refund at all. If this letter doesn’t satisfy you, you can either contact the Bureau of Fiscal Service for more information, or else take action on the letter yourself.
To avoid receiving a Notice of Intent to Offset, and avoid a tax offset altogether, you’ll need to pay off all of your debts, along with any interest or penalties you may have accrued. If you need professional help in dealing with your tax topic 151 or tax offset, consult with the experts at Community Tax, who can provide you with professional advice to steer clear of any tax-related issues.
How to Take Action on IRS Code 151
The initial tax topic 151 letter is a notification that your tax return is under review. After this first letter, you should wait approximately four weeks, or possibly longer, for an additional letter from the IRS that will provide you with instructions about what additional documentation and information they need from you in order to finish processing your return. This letter should also update you as to whether they plan on continuing to pursue or dropping the tax topic 151 classification.
In the case that they are continuing to pursue the tax topic 151 classification, the letter should lay out why you’ve received the tax topic 151 classification, the action the IRS plans to take or has already taken, and the options at your disposal. This letter will also include:
- Information about your appeal rights
- Instructions on how to file an appeal
- An explanation of how to set up a meeting with an Appeals or Settlement Officer
If you’re already aware of your debts that prompted the tax topic 151 classification, then you should take steps to resolve these debts as quickly as possible. In this case, it’s best to seek out professional help. For example, if you have unpaid income taxes, you should contact the team at Community Tax and talk to them about their income tax debt relief services.
However, if you disagree with the tax topic 151 classification, the easiest and most cost-effective way to appeal the decision is to take it up with the IRS directly. In order to avoid a costly trial process, the IRS encourages taxpayers to settle disputes through an informal administrative process instead.
Under these circumstances, you’ll have to make your case to The Independent Office of Appeals, which is an agency unrelated to the IRS that exists to mediate and resolve tax controversies. The goal of this office is to take into consideration the perspectives of both the taxpayer and the IRS, and, after careful review, deliver a fair and impartial judgement on the matter. It is the only office where you can file an administrative appeal when you disagree with a decision made by the IRS. If you decide to request an appeals conference, you’ll be expected to bring the proper records and documentation with you in order to support your position.
If you’re willing to put in the time and energy, an appeals conference can be a great way to get some of your tax refund back or have the tax topic 151 classification reversed entirely. You’ll have to thoroughly prepare a case, but in some cases you may be able to set up an IRS payment plan that gives you more flexibility in paying off your debts than a tax offset.
What are My Tax Topic 151 Appeal Options?
When it comes to appealing a tax topic 151 classification, you have two primary options: Appealing directly to the IRS via The Independent Office of Appeals and setting up a conference to address the dispute; or, alternatively, you can file a case in court. Here we’ll take a closer look at both of these options.
File an Appeal Within the IRS
Filing an appeal directly with the IRS is the most straightforward way to address your tax topic 151 classification. You’re able to appeal the majority of IRS decisions at your local Appeals office. In many cases, the first step in requesting an appeals conference is to file a formal written protest or a small case request with the appropriate office, which should be the office named in the letter sent to you by the IRS.
In the case of a formal written protest, you’ll have to send it within a given window of time that should be outlined in the IRS’ letter to you (generally 30 days from the date of the letter). A written protest will include all of the following pieces of information:
- Your name, address, and the best phone number to reach you
- A clear statement that you intend to appeal the IRS findings to the Appeals Office
- A copy of the IRS letter that lays out the findings you disagree with
- The tax periods or years relevant to your dispute
- A list of the actions or changes you don’t agree with and the specific reasons why you disagree
- Evidence that supports your claims
- References to any laws that your argument relies on
Once you have included all of this information in your written protest, you’ll have to sign the document and send it to the proper office within the window of time given to you by the IRS.
However, if the total amount for any tax period is below $25,000, then you can file a small case request rather than a formal written protest. The instructions for how to file a small case request should be included in the letter the IRS sent you, but essentially you’ll just have to fill out Form 12203 (Request for Appeals Review) and outline what you disagree with and why.
Once you’ve submitted a request for an appeals conference with The Independent Office of Appeals, they will reach out to arrange a conference at a time and place that’s convenient for you. Appeals conferences are informal meetings that are often held in-person, but in some cases can be held via written correspondence or telephone. You’ll need to show up to the conference ready with all of the documents, records, and laws necessary to make your case. You can represent yourself if you wish, or bring along your attorney or certified public accountant. Just note that whoever accompanies you as representation must be authorized to practice before the IRS.
File an Appeal to the Courts
If you fail to come to an agreement at an appeals conference, or if you wish to skip the conference entirely, then you’ll have to take the issue up within the court system. This means that you’ll have to file a case with the US Tax Court, the US Court of Federal Claims, or your US District Court.
The US Tax Court handles taxpayer disputes with the IRS over things like income tax, estate tax, gift tax, and certain other taxes. You’re able to file a case in this court only after the IRS issues you an official letter stating the amounts it believes you owe, called a notice of deficiency. You’ll have to file a case with the Tax Court within 90 days after the notice of deficiency has been mailed. If you previously opted to forgo a conference with the Appeals Office, you’ll typically be given an opportunity to settle your dispute with the IRS with one of these conferences before your trial officially begins.
On the other hand, you can take your case to the US District Court or US Court of Federal Claims when your case involves a refund of any type of tax. These courts will usually hear cases only after you’ve paid the tax and filed a refund with the IRS.
Bringing your appeal to the court system should be saved as a last resort, since the courts are much more formal than an appeals conference, you’ll likely have to shell out a lot of money for an attorney, and the evidential and procedural rules are far more complex. You should also keep in mind that you need to have a legitimate case if you bring the dispute to court—if the court determines your case to be frivolous, you could face a penalty of up to $25,000.
In order to prevent the loss of your tax refund, you have to keep yourself informed and organized. To prevent a tax topic 151 notice from appearing on your doorstep, stay on top of your finances and work with the experts at Community Tax to get all of the tax-related help you need.