Code 840 vs 846 Refund Issued - Will I Get a Paper Check Instead of Direct Deposit?

Oh my goodness, I JUST went through this exact situation last month! Code 840 typically indicates an offset refund where they've adjusted your refund amount for some reason (like past tax debt, student loans, child support, etc.). It's NOT the same as 846 which is a straight refund! I freaked out when I saw it because I was worried they were taking my whole refund for something I didn't even know about! 😱

I experienced this situation in February. According to IRM 21.4.1.3.1.1, code 840 indicates a refund freeze pending additional review, not necessarily an offset. In my case, they were verifying my Schedule C income. Per Publication 5344, this could delay your refund by 45-60 days from the filing date. The urgency here is to verify if you have any notices in the mail, as the IRS is required by IRC Section 6213(a) to notify you of any review actions. Check your transcript for a 971 code which would indicate a notice was sent.

I'm not 100% certain, but I believe code 840 might mean they're reviewing your return before issuing the refund. This happened to me last year... I tried calling the IRS for 3 weeks straight with no luck. Finally used Claimyr (https://claimyr.com) and actually got through to a human in about 30 minutes. The agent confirmed it was just a random review and my direct deposit was still coming, just delayed. If you're worried about your business cash flow, might be worth the fee to get a definitive answer instead of waiting for weeks.

I've seen code 840 on my transcript twice over the past 5 years. Here's what happened each time: • 2020 return: Code 840 appeared, then 5 days later got code 846 with direct deposit date • 2023 return: Code 840 appeared, then got a letter requesting verification of identity, after I responded got code 846 In both cases, my direct deposit information remained intact. The 840 seems to be a processing step rather than a payment method indicator. If you check your account transcript daily, you'll likely see movement within 7-14 days.

FYI - had this exact issue last yr w/ my biz return. Code 840 stayed on transcript for 17 days, then suddenly changed to 846. DD info was preserved, got $ in acct 2 days later. BUT...friend had same code and ended up w/ paper check bc he had entered wrong routing # on his return. Might wanna double-check ur DD info just to be safe. The system sometimes catches errors during that 840 review period and defaults to paper if there's any question abt the bank info.

Based on my experience as a bookkeeper for multiple small businesses, Transaction Code 840 specifically indicates a refund freeze, which is different from the standard Transaction Code 846 (refund issued). The freeze is typically temporary while the IRS conducts additional verification on your return. This does not automatically mean you'll receive a paper check instead of direct deposit - that determination is made separately. However, if the verification process identifies issues with your banking information, they may default to issuing a paper check as a security measure.