Latest Facts and News
- The IRS processed over 162 million individual tax returns in 2023.
- Electronic filing continues to be the preferred method, with 92% of returns filed electronically.
- The average tax refund for 2023 was $3,167, down 2.6% from the previous year.
- The IRS has introduced new digital tools to improve taxpayer services.
Reading the tax transcript can help you better manage your tax payments. The codes used by the IRS on tax transcripts, like code 806, are important when calculating the amount you need to pay the IRS as the federal tax due or the tax refund you can claim. A lot of taxpayers don’t understand the IRS codes used and wait till the due date before taking action and get penalized as a result.
In this blog, information taxpayers must know about the IRS code 806 has been compiled. Read on to know about what the amount next to code 806 indicates on your transcript and how to interpret it as per your tax situation.
What is IRS Code 806?
The IRS code 806 represents the tax withheld by an employer on behalf of their employee throughout the year as per federal tax laws, generally on Form W-2 or 1099. Either the employer or the taxpayer’s brokerage account administrator typically handles the withheld tax.
| Clarification Corner Most people mistake the code 806 amount on their transcript as either the remaining tax they owe or the tax owed by the IRS to them (tax refund). This numerical figure actually shows the withholding and is used to calculate the final pending transaction amount, whether owed by the IRS or by the taxpayer. |
The Official Title of IRS Code 806
Credit for Withheld Taxes and Excess FICA refers to the total amount of federal income tax withheld from your paycheck, along with the Social Security (FICA) and Medicare taxes you’ve paid.
IRS Code 806 on your tax transcript indicates that the IRS has recorded these tax payments and received your return. However, it does not mean that your refund has been approved yet.
Understanding Your IRS Tax Transcript
Your IRS tax transcript contains all essential details of the tax for that year. It comes with figures of the income earned and the credits and deductions in the return applicable for that year. It is a more compact document than your tax return statement, containing all important details from it.
How to Access Your Tax Transcript
You can get your tax transcript both online and offline through the options given below:
- Online method: Log in to your individual online account through your ID.me log in to check all tax details from the current and previous years. You can also make payments and check tax balances through this portal.
- By mail: You can also get the transcript delivered to you by mail in five to ten calendar days. The tax return transcript is delivered to the address filed by the IRS. To get the transcript, you can either call 800-908-9946 or apply on the IRS website.
Interpreting IRS Code 806 on Your Transcript
The amount mentioned next to code 806 on the IRS tax transcript has already been paid to your federal tax, without calculating any tax credits or deductions that may apply in your case. The final status and amount for the tax applicable are calculated taking into account these credits or deductions. The IRS code 806 amount can be positive or negative, and each has a different meaning:
| Positive Amount | Negative Amount |
| A positive amount means that the federal tax withheld is lesser than the total tax you need to pay. | A negative amount means that the federal tax withheld is more than the total tax you need to pay. |
| It is possible that since the code 806 indicates that tax is underpaid, you may need to pay back the owed taxes to the IRS after you are given the final tax amount calculated, taking into account the amount as per other codes as well. | It is possible that since the code 806 indicates that you overpaid the tax, you may receive a refund from the IRS after you are given the final tax amount calculated, taking into account the amount as per other codes as well. |
How IRS Code 806 Affects Your Tax Situation
The amount from code 806 indicates if taxes are overpaid or underpaid. To calculate the final income tax levied, you need to factor in other codes as well.
What to Do If You See IRS Code 806 on Your Transcript?
If code 806 is mentioned in your tax transcript, it is nothing to be alarmed about. All in all, it is just an indicative figure. However, you do need to check it to confirm if the amount mentioned here matches with the amount in Form 1040.
When to Seek Professional Help?
If the amount mentioned in IRS code 806 does not match the withholding amount reported on Form 1040 line 25d (details given in the screenshot below), it might be a cause of concern. This indicates a discrepancy in your information and the IRS records.
There are a number of reasons why this may have happened, and working with a professional ensures that you avoid losing out on potential gains from taxes or avoid having to pay extra in penalties.
In case the amount for code 806 does not match their records, the IRS might send you a notice regarding the discrepancy. This is when you need Michael Sullivan’s help in IRS letters/notices.
Comparing Code 806 to Your Tax Return
When checking the IRS code 806 amount, ensure that it is the same amount as the one mentioned on line 25d of Form 1040.
If the amount does not match, you need to address it as soon as possible to avoid any potential penalties imposed by the IRS.
Here are the steps you need to follow if the amount does not match:
- Verify your records: You need to check the withholding amounts mentioned in your W-2s and 1099s. Ensure all income documents have been reported correctly.
- Amend tax return if needed: If you made errors in reporting the withholding amounts, you need to amend your tax return with Form 1040-X to correct the information.
- Contact the IRS to clarify: Resolve any discrepancy in the IRS transcript by reaching out to the IRS. Contacting the IRS as soon as you can when you notice the discrepancy helps avoid an IRS review.
In case you need to amend your tax return, Michael Sullivan’s unfiled tax returns services can further help.
Reasons why the IRS code 806 amount may not match the amount for tax withholding mentioned in Form 1040:
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Get in Touch With Michael Sullivan!
It is easy to get confused when you see IRS code 806 in your tax transcript for the first time. The code 806 amount shows the withholding amount, usually filed by your employer on W-2 forms. Neglecting to declare the discrepancy to the IRS may lead to a penalty or even an IRS review.
Contact Michael Sullivan if you face such tax issues with the IRS. Being a former IRS agent himself, he has the experience and skill needed to guide you and get you out of such tricky situations and turn the tide in your favor.
Frequently Asked Questions
The amount mentioned in code 806 does not indicate a tax refund amount, though it is a figure used to calculate the refund amount if applicable for that taxpayer. This amount is indicative of the withholding amount from the taxpayer, which is used to pay federal taxes. A tax refund is initiated only when the tax paid through withholding is a larger amount than the tax owed to the IRS.
he information for IRS code 806 is updated on the tax return by the IRS when it processes the return and confirms any withholding amount. It is usually done once per tax year to confirm the tax return details. Adjustments may be made in it if an amended tax return is filed to confirm the changes.
In case the amount in IRS code 806 does not match your W-2 or 1099 forms, reach out to the IRS to resolve the discrepancy. It is better to bring any such conflicting figures to the notice of the IRS as soon as you can to avoid delayed tax refunds. Contact Michael Sullivan if you need professional guidance in helping you resolve such discrepancies.
The IRS code 806 is calculated by adding together withholdings filed with all W-2s and 1099 forms. In the tax return, the withholding mentioned depends on the form used. The tax return thus contains details of the withholding amount as per the form filed, but in the transcript, only the major detail of the full amount is shown, minus the details.
It is possible that your tax transcript does not show the code 806 amount as of now. If your transcript does not mention it, look for a 570 code in the transcript, which means that there are additional actions pending before it can be processed further, such as verifying your exemptions. This has been implemented to prevent scan W-2s from claiming refund. Follow the instructions by the IRS so that it can be processed.
