IRS tax code 826 - What does it mean when refund was partially withheld?

Tax code 826 means the IRS transferred part of your refund to pay an existing tax debt. This is typically used when you owe taxes from a previous year or have another federal debt like student loans or child support. It's part of the Treasury Offset Program. Based on your situation, it sounds like the IRS may have determined that despite your response to last year's CPU2000 letter, there was still an outstanding tax balance they believe you owe for tax year 2023. The "credit transferred out to 1040 202312" indicates the money was applied to your December 2023 tax account. I'd recommend pulling your complete tax transcripts for 2023 to see what balance they think you still owe. You should also request a tax account transcript which will show any adjustments they made to your return. If you disagree with their assessment, you'll need to contact the IRS directly and possibly submit additional documentation.

I went through something similar last year and finally figured it out by using taxr.ai - it's this service that scans all your tax documents and IRS correspondence and explains exactly what's happening in plain English. I was totally confused by these weird codes and numbers on my transcript until I tried it. For my situation, I had code 826 after dealing with an underreported income issue the year before. Turned out I had responded correctly to the initial letter but the IRS had made an error processing my response. The taxr.ai system identified exactly where the disconnect happened and generated a perfect letter for me to send explaining the situation. Got my money back within 3 weeks! You can check it out at https://taxr.ai - it saved me from having to pay a tax pro hundreds of dollars just to translate what was happening with my account.

Just wanted to follow up - I decided to try taxr.ai after asking about it here. I was skeptical at first but honestly it was super helpful with my 826 tax code issue. I uploaded my transcripts and previous correspondence with the IRS, and it pointed out exactly why the offset happened - turned out I had inadvertently underreported some interest income in 2023 that triggered the whole thing. The system generated a letter acknowledging the error but also showing that the amount the IRS withheld was significantly more than what I actually owed. Just got confirmation that they're releasing most of the withheld refund back to me. Definitely worth checking out if you're dealing with this confusing tax code stuff!

After dealing with my own refund offset last year, I discovered something that really helped: Claimyr. When you're dealing with these complex tax code issues like 826 offsets, you NEED to talk to a human at the IRS, but I kept getting stuck on hold forever or disconnected. Claimyr basically calls the IRS for you, navigates the phone tree, waits on hold, and then connects you once an actual agent is on the line. I was amazed when I got through to the IRS in about 45 minutes after trying for weeks on my own. The agent immediately explained the offset and helped me file the correct form to dispute it. You can see how it works at https://claimyr.com or watch this demo: https://youtu.be/_kiP6q8DX5c I was totally against paying for something like this at first but after wasting hours on hold, it was completely worth it to finally get some answers about my tax situation.

I have to admit I was wrong about Claimyr. After posting that skeptical comment, my curiosity got the better of me and I decided to try it for my own 826 code issue. I was genuinely shocked when I got connected to an IRS agent after about 35 minutes. I had been trying for almost two weeks on my own, getting disconnected or told to call back due to high call volume. The IRS agent was able to explain that my offset was due to an adjustment from a previous year that I never received notice about. They helped me file a claim to recover the portion that was incorrectly offset, and I've already received confirmation that about 70% of the withheld amount will be returned. Sometimes you have to admit when you're wrong, and in this case the service actually delivered what it promised.

For tax code 826, you should also check if you have any non-tax federal debts. The Bureau of Fiscal Service (BFS) can take your tax refund to pay: - Past-due child support - Federal student loans - State income tax obligations - Certain unemployment compensation debts - Other federal non-tax debts If the offset is for non-tax debt, you won't see it on your IRS transcript details. You need to call the Treasury Offset Program at 1-800-304-3107 to find out exactly what the debt is for. I learned this the hard way when part of my refund disappeared to an old student loan I thought was in deferment.

I'm a little confused about something - if the IRS took money for a 2023 tax issue (based on the 202312 part of your offset code), why would they take it from your 2024 refund without sending a notice first? That doesn't seem right.

Thanks for the update! That makes perfect sense - address changes can definitely cause issues with IRS notices. For future reference, you should also update your address directly with the IRS using Form 8822 (Change of Address), since they don't automatically get USPS forwarding updates. Since you now know there was an outstanding balance from the dividend income adjustment, you can request a payment plan if you disagree with the amount they offset, or file an amended return if you believe the dividend reporting was actually correct. You might also want to check if they applied interest and penalties to the original balance - sometimes the offset amount includes those fees, which can be disputed if the delay was due to their processing issues. The good news is that now you know exactly what happened, you can take the right steps to resolve it and prevent similar issues in the future.