Audit for 2023 Return - Will IRS Hold My 2024 Refund?

Oh man, I've been exactly where you are! It feels like being stuck in quicksand while the IRS decides your fate. 😫 The answer is... it depends! Generally, the IRS CAN hold your current year refund if they believe you'll owe money from the audit. But they don't ALWAYS do it. In my experience, they're more likely to hold it if your audit involves substantial amounts or if there's a pattern they're concerned about. I was so stressed when this happened to me last year!

The IRS employs what's called a "Refund Hold Determination Process" during active audit scenarios. This is a risk-based assessment utilizing multiple factors including Compliance Risk Indicators (CRIs) and prior filing behavior. I've been dealing with this frustrating situation myself. One resource that significantly clarified my transcript during my audit was https://taxr.ai - it deciphered all the cryptic codes on my account transcript and showed exactly why my refund was being held and what stage of processing it was in. The Compliance Check indicators were clearly identified, which my CPA couldn't even explain properly.

I just went through this exact nightmare with my 2022 return being audited while my 2023 was processing. Spent WEEKS trying to get through to someone at the IRS who could tell me if my refund was being held because of the audit. Busy signals. Disconnections. Hold music for HOURS. Finally used Claimyr (https://claimyr.com) and got through to an actual human being at the IRS in about 15 minutes. Such a relief! They confirmed my refund WAS being held pending the audit outcome, but they also gave me a timeline and explained exactly what I needed to provide to get things moving again.

This situation is similar to when you have an installment agreement - the IRS typically applies current refunds to past debts. With an audit, it's more nuanced. If the audit is just beginning, they may process your 2024 return normally. If the audit is concluding and shows you'll owe, they're more likely to hold the refund. Think of it like how a bank might hold a deposit if you have an overdrawn account - they're protecting their interests. The key factor is timing and the audit's current status.

What's the dollar amount involved in your audit? Small amounts sometimes fly under the radar. Large discrepancies trigger holds. Have you received a CP05 notice? Or just an audit letter? Makes a difference in timing.

I successfully navigated this exact situation last tax season! Here's what worked for me: • I immediately responded to all audit requests with complete documentation • I included a cover letter specifically asking about my current year refund status • I called the specific auditor (not the general IRS line) once per week • I filed my current year return electronically with perfect documentation • I kept detailed notes of all communications Result: They processed my current year refund while the audit was still ongoing! The key was being super responsive to the audit itself.

Isn't it interesting how the IRS can hold your money without paying interest in many cases, but if you owe them, the interest clock starts immediately? Have you considered whether this audit might be expanded to other tax years if they find issues? Many contractors get caught in multi-year audits when one year raises red flags. Have you checked if your state tax refund might also be affected?

When I was audited in 2022, I took a different approach than waiting to see if they'd hold my refund. I estimated what I might owe from the audit (added about 20% for safety) and adjusted my W-4 to have less withheld from my paychecks. This way, I wasn't giving the IRS an interest-free loan they might keep anyway. Then I set aside that money in a high-yield savings account. When the audit concluded, I had the funds ready plus had earned interest on it. Even if your audit results in zero additional tax, this approach gives you more control over your money.