What is Tax Topic 151? About Your Appeal Rights
You filed your federal tax return, expecting a big refund from the Internal Revenue Service. Instead, when you check Where’s my refund with the IRS refund status tool, you see a reference to IRS Tax Topic 151.
So what is Tax Topic 151?
According to the IRS website, IRS Topic No. 151 refers to taxpayer appeal rights. There might be numerous reasons for this to appear.
However, this reference is usually generated when a proposed adjustment is being made or a collection action is being taken against the taxpayer. This collection action usually you’ll receive a partial refund or no refund in lieu of a full tax refund.
This article will walk you through everything you need to know in the event you see this when checking the status of your return, including:
- How you might see Tax Topic 151
- What you can expect
- What your options are
- How you can avoid seeing this in the first place
Let’s start with discussing exactly what Tax Topic 151 is.
What is Tax Topic 151?
The IRS website cites Tax Topic 151 as a general reference for taxpayers who are looking to appeal an IRS decision. Tax Topic 151 isn’t a status itself, but simply a reference to your appeal rights and the appeals process in the event you’re disappointed with your refund amount.
What happens when I see Tax Topic 151?
Usually, you’ll see the first letter within about 3 weeks after electronically filing your income tax return. This letter simply states that your tax return is under further review. At this point, you do not need to take action.
Instead, you should wait for a second letter, which should come about a month after the first one. This letter should have additional information, to include:
- Why you received the notice
- What actions the IRS has taken, or plans to take
- What your appeal rights are
- How to file an appeal
Why do I see Tax Topic 151?
Many times, this happens to people who check the status of their refund just to find out that the IRS has made an adjustment, or is taking a collection action for money they might owe. Here are some of the most common reasons you’ll see this pop up.
The IRS is making an adjustment that will impact your tax refund
Sometimes, this status pops up as the IRS is collecting additional information to better understand various credit claims, like the child tax credit. If the IRS determines you used incorrect information in your tax return, then an adjustment will be made and your taxable income will be recalculated.
In some cases, the IRS may give you the whole refund after the review is complete.
You owe income tax
If you owe the federal government money for unpaid taxes, then the IRS will simply withhold your refund as a tax offset to pay down your tax liability. We’ve written extensively in another article about how the IRS collects back taxes.
You owe money to someone and the Department of Treasury is collecting on their behalf.
If you owe money, but not to the IRS, the IRS might still be tasked to collect it from you.
Under the Treasury Offset Program, any payments issued by federal government agencies (including the IRS) are screened against a list of businesses and people who delinquent debts. The Treasury Offset Program is authorized to collect against these types of debts:
- Unpaid state taxes
- Unpaid child support payments
- Delinquent state unemployment insurance payments
- Delinquent Supplemental Nutritional Assistance Program (SNAP) debt
- Delinquent federal student loans
In addition to withholding part or all of a federal income tax refund, federal law authorizes the Treasury Department to offset the following types of payments:
- Federal salaries & retirement pay
- Social Security payments
- State payments, if the state is in a participating agreement under the Treasury Offset Program
What are my options?
Despite what you may think, you do have some options.
This might be the default option if the adjustment isn’t too severe, or if you recognize that the adjustment was necessary. Sometimes mistakes happen, and the IRS is more than happy to make the adjustments to your tax liability.
Get current with your financial obligation.
Perhaps you do owe that debt. Perhaps you fell behind on your student loan obligations.
If you need to bring your student loans up to date or catch up on your child support, then that might be a better use of your time than getting frustrated.
But if you believe that this is in error, or that the IRS has made a mistake, you can go through the appeals process. You can do this either with the IRS or through the courts system.
There are two types of appeals. But before we discuss appeals, perhaps we should discuss the Taxpayer Advocate Service.
What is the Taxpayer Advocate Service?
The Taxpayer Advocate Service is an independent branch within the Internal Revenue Service that exists solely for taxpayer protection. The Taxpayer Advocate helps to ensure that IRS agents followed the proper procedures as outlined in the Internal Revenue Manual.
But if the Taxpayer Advocate finds that the IRS made the proper tax adjustment, then your best bet is with the appeals process.
Go through the appeals process with the IRS.
If you choose to appeal directly with the IRS, you’ll be requesting an appeals conference with the Independent Office of Appeals, which is completely separate and independent from your examiner’s office. You typically have 30 days from the time you received your letter to file an appeal with the IRS.
An appeals conference is intended to be an informal administrative process. You may choose to attend or have a lawyer, enrolled agent, or your accountant represent you at an appeals conference.
If you are dissatisfied with the outcome of the appeals conference, you can still appeal through the court system.
Appeal through the court system.
If you choose to appeal through the courts, you have up to 90 days to file your appeal. Because this is a legal process, it is highly recommended that you seek legal counsel with an experienced tax attorney before you consider this option.
The IRS does also recommend some additional resources if you wish to know your rights in the appeals process.
Additional resources regarding the appeals process
For further information on appeals and information on how to stop interest from accruing on any anticipated tax liability, the IRS offers the following resources:
- Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree
- Publication 556, Examination of Returns, Appeal Rights and Claims for Refund
- Publication 1660, Collection Appeal Rights
You can also visit the IRS appeals page for additional information about dispute resolution, technical guidance, and more.
How can I avoid this?
There are some things that you can do to prevent your tax return from being held up.
Stay on top of your debts and financial obligations
This is probably the biggest
If you don’t file electronically, you should do so, for the following reasons:
Security: Not only does electronic information move more quickly than paper, but it is also more secure than a paper return. Mailing your tax return means that your private information is now subject to identity theft while it’s in the mail.
Conversely, the IRS e-file system is the fastest and most secure way to report your taxes to the IRS. You also receive fast confirmation that your return was received. Within several business days, you should have an e-file acceptance notification through the system.
Accuracy: One of the most common reasons that tax filers get frustrated with their tax situation is because their paper returns have accuracy-related errors. Having electronic filing software can help you reduce the mistakes that go into your tax return.
Enroll in direct deposit
In today’s day and age, there’s no reason you shouldn’t have direct deposit for your tax refund. If you insist on a paper check, then you can expect to wait longer.
Ensure your tax return contains accurate information
Software can help. Here are some common accuracy-related mistakes the IRS wants taxpayers to be on the watch for:
- Name, address, Social Security number
- Filing status
- Having the correct dependent information
- Proper calculations
Most of these can be addressed through software, but here is a more encompassing list of accuracy-related mistakes the IRS often catches.
Have a tax expert do your tax return for you
If you don’t have a tax professional file your tax returns, you may want to consider it. Not only does an accountant have access to the right software, they keep up to date on all the changes to the IRS tax code and other necessary information to keep on top of your tax situation.
Additionally, your tax professional can represent you in front of the IRS should your return require an audit, or if you intend to go through the appeals process.
If you enjoyed this article, please check out more of our tax-focused content in our tax planning archives!