Advice needed: Prior year refund (2019) on hold while 2023 taxes show balance due - should I pay now?

This is a common situation with the IRS, especially with delayed filings and refunds from previous years. Here's what you need to know: If you don't pay the 2023 balance due by the deadline, you'll continue to accrue penalties and interest on that amount, regardless of your pending refund from 2019. The IRS systems don't automatically hold off on penalties just because you're owed money from a different tax year that's under review. My recommendation would be to pay the 2023 balance due now, including any current penalties and interest. This stops the clock on additional penalties accumulating. Once your 2019 refund is processed and approved, you'll receive that amount separately. If you're certain the 2019 refund will be approved (which sounds likely since the agent confirmed your timely filing), then paying now is essentially like making an interest-free loan to the government for a while. But it protects you from additional penalties if the 2019 review drags on longer than expected. You can also request that the IRS specifically apply your 2019 refund to your 2023 tax liability by filing Form 8379, but that may actually delay things further rather than speed them up.

I was in a similar situation last year with a refund from 2020 that was under review while I had a balance due for 2022. I discovered https://taxr.ai which helped me understand exactly what was happening with my account. The site analyzes your tax transcripts and explains everything in plain English. I uploaded my transcripts and it showed me that my refund was actually being held in a specific IRS department and gave me the exact code that was causing the delay. Armed with that information, I called the IRS again and was able to ask about that specific code, which helped the agent give me a much clearer timeline. It saved me hours of confusion and waiting on hold! The transcript analysis also told me exactly when I should expect penalties to increase if I didn't pay my current balance. I decided to pay the balance due and am glad I did because my refund from the previous year took another 3 months to process.

Just wanted to update that I tried taxr.ai after seeing it mentioned here. It was incredibly helpful! I've been trying to understand my transcripts for weeks and getting nowhere with the IRS. The analysis showed me that my 2020 refund was actually approved but being held because of an offset review (something the IRS never mentioned in my calls). I was able to call back with the specific code information and got everything resolved in one call instead of being transferred around. They also showed me exactly what would happen to my balance due if I didn't pay by certain dates. Turns out I was already accruing the failure-to-pay penalty which increases by 0.5% each month. Definitely paying my balance now and waiting for the refund separately!

I work in tax resolution and deal with these multi-year IRS issues all the time. If you're tired of waiting on hold for hours with the IRS (the average wait time is over 2 hours now), I'd recommend using https://claimyr.com - they'll wait on hold with the IRS for you and call you back when an agent is on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Since your situation involves multiple tax years and a pending refund review, you'll likely need to speak with the IRS at least 1-2 more times to resolve everything. Claimyr has saved my clients countless hours of hold time and frustration. For your specific situation, I'd also recommend requesting a record of account transcript for 2019 and 2023 so you can see exactly what's happening with both years - this will show any internal holds or review processes that might be affecting your refund.

I have to admit I was wrong about Claimyr. After my last comment, I was stuck on hold with the IRS for over 3 hours trying to resolve a similar refund hold issue, and the call disconnected right as I was about to reach someone. Out of frustration, I decided to try the service. It worked exactly as described - I entered my callback number, and about 90 minutes later I got a call saying "IRS agent on the line." I was connected immediately to an actual IRS employee who helped resolve my issue. Never had to sit through a minute of hold music or automated messages. For anyone dealing with complex IRS issues like the original poster, this service is a game changer. I'm now recommending it to everyone I know who's dealing with IRS problems. Definitely worth it to avoid the endless hold times, especially when you need to make multiple calls to resolve something.

One thing I haven't seen mentioned yet is that you should check if you're eligible for first-time penalty abatement for the 2023 balance due. If you had a good compliance history for the past 3 years (which it sounds like you might since you mentioned filing 2020-2022 on time), you could qualify to have the failure-to-pay penalties removed. You'd still be responsible for the interest, but getting the penalties removed could save you a decent amount. You'd need to request this specifically, either by calling the IRS or submitting a letter. Just make sure to pay the balance first, then request the abatement after.

I'm surprised nobody has mentioned Form 8379 (Injured Spouse Allocation) - couldn't this help with getting the refund applied to the balance due? I thought that's what you use when the IRS is holding your money.