You’ve been dealing with some tax issues. You thought the information for your EITC and other credits was accurate, but now you’ve been discussing the matter with an agency representative.
As you look at the transcript one day after that conversation, you see Code 766 or Code 768 present. What does that mean?
What Does Code 766 and 768 Mean on IRS Transcript?
Code 766 on an IRS transcript indicates that a credit was placed on a consumer’s account and that a return was submitted. It is typically a refund from a tax overpayment, but it can be a credit from a prior year. Code 768 represents an amount from the earned income credit available under the current U.S. tax code.
When you see a specific code appear on your tax transcript, it can feel a little concerning. Does that mean your information was selected for an audit?
In most circumstances, the different transcript codes are a shorthand method for the Internal Revenue Service to see what is happening with your account. Most personal tax returns aren’t audited, although mistakes are corrected by the agency, and the returns are modified if the amounts listed are incorrect.
Code 766 is the most common one consumers see when they file their tax returns. When it appears on your account, it indicates that your tax liability was reduced after someone reviewed the history.
The most common reason for Code 766 to appear involves an overpayment from the previous year that results in a refund. You might also qualify for a credit in the current return. Either way, you’re getting some money back.
If the amount from Code 766 is unexpected, you’ll receive a letter in the mail indicating why the change happened. The IRS only communicates this way, so don’t listen to any phone calls or reply to emails suggesting that you need to take specific action to receive this amount.
The check you receive from the Code 766 indicator is typically included with the letter indicating why you’re getting extra money.
What Does Code 768 Mean on My IRS Transcript?
When you see Code 768 on your transcript, that means an amount from the earned income tax credit (EITC) has been credited to your account.
The EITC is intended to help people with low or moderate incomes receive a tax break. Families can use the amount to reduce their tax liabilities when they qualify for it. It can sometimes trigger a refund or increase what you receive, which creates this transcript code notation.
What people receive through the EITC changes based on the number of dependents or kids in their household. Clergy members and those serving in the military have special rules to follow to avoid having their other government benefits modified when filing the return.
It’s not unusual for those with qualifying EITC amounts to see refund delays. The IRS must wait until the middle of February to issue funds to qualifying taxpayers.
What Are the Basic Qualifications for the EITC?
The earned income tax credit is meant for low-income workers, typically below the federal poverty line, with qualifying children in the home. This structure reduces the household’s tax liability, often creating an opportunity for a refund when one wouldn’t normally exist.
Individuals or those who are married and filing jointly must meet five specific rules to qualify for the EITC for the 2022 tax year.
- They must be working or have worked and have income levels below $57,414.
- A valid Social Security number must be provided by the due date of the return.
- Individuals must be qualifying resident aliens or U.S. citizens for the entire year.
- Form 2555 is not attached to the tax return to indicate foreign income.
- Investment income for the year must be below $10,000.
The IRS doesn’t accept adoption taxpayer identification numbers, individual taxpayer identification numbers, or Social Security cards that have the words “not valid for employment” printed on them.
If you’re not married and pay more than 50% of keeping up the home where you live with a qualifying child, you can claim the EITC as the Head of Household.
What Are the Qualifying Costs for Keeping Up a Home?
One of the unique stipulations under Code 768 on the IRS transcripts is the cost of home upkeep when using the Head of Household filing status.
Several costs can be included in this calculation, but many expenses don’t qualify. Here’s a closer look at what you can claim when making this calculation, along with the items that should be excluded.
| Costs You Can Claim for Code 768 | Costs You Cannot Claim for Code 768 |
| Mortgage Interest Payments | Money Received from TANF and Similar Programs |
| Home Repairs and Utility Expenses | Expenses Related to Education or Clothing |
| Real Estate Taxes | Prescription Drugs, Medical Treatments, and Medical Insurance Payments. |
| Homeowners or Renters Insurance | Transportation Expenses, Including Lease Payments and Public Transportation Costs |
| Food That You Eat in the Home | The Rental Value of a Home You Own |
| Some Costs Paid with Public Assistance | Vacation-Related Expenses |
| Monthly Rental Costs | Value of Your Services or Those in Your Home |
It helps to maintain receipts for the various qualifying expenses if you plan to claim the EITC as a Head of Household. When you can provide evidence of these costs, it’ll be easier to add up the totals and survive an audit, should one occur.
Can I Claim the EITC If I Don’t Have Any Kids?
Some people can qualify for the earned income tax credit without having a qualifying child. To see if you fit into this category, you’ll need to meet all the following rules.
If you decide to file jointly, you and your spouse or partner must meet them all.
- The filer must meet all the basic qualifying rules of the EITC.
- The primary home must have been in the United States for more than half of the current tax year. This status includes military bases and the District of Columbia, but territories or possessions are excluded. Those living in Puerto Rico, Guam, the Virgin Islands, and other owned spaces outside the 50 states don’t qualify.
- Individuals cannot be claimed as qualifying children on anyone’s tax return.
- Must be at least 18 years old at the end of the tax year, which is December 31 for most filers in the United States.
The minimum age for collecting the earned income credit is typically 19, but some people qualify because of their home status. Qualified homeless or former foster youth can file their returns for it when they reach 18.
For those who are specified students who don’t qualify as homeless or as former foster youth, the EITC requires you to be 24 years old before a valid claim is recognized.
If you see Code 768 on your tax transcript, you’ll know the information relates to this issue.
What Does the Date Mean by the Transcript Code?
When you see a date next to Code 766 or Code 768, it means that is when the IRS applied the credit to your account.
If the code is present because of an overpayment on the account, it will be the day when the prior year’s return was due. Other credits are placed there when the IRS processes your paperwork.
Additional information about these codes and payments is available by contacting a representative at the IRS toll-free helpline. Dial 1 (800) 829-1040, but please remember that wait times can be significant.
The IRS often requests or requires a written explanation of the issue before making account adjustments.
When Will I Receive My Code 766 or Code 768 Refund?
Those that know they have a tax refund coming can check on it by using the IRS’s Where’s My Refund online tool. Most people receive a direct deposit of their funds within 14 to 21 days of the agency processing the return.
If you receive a paper check because the IRS doesn’t have your bank account information, it can take between three to six weeks for the money to arrive.
You might receive a letter related to your Code 766 or Code 768 status in the mail before the check arrives.
When the timeframes are longer and information isn’t available in the Where’s My Refund tool, you can contact the IRS to request a replacement check or an account review.
Do I Need to Complete Any Paperwork for My Refund?
Taxpayers with Code 766 or Code 768 on their IRS transcript typically don’t need to take additional steps to receive their refunds. The remaining amount remains due for those with an outstanding balance that isn’t relieved by these credits.
I received a check in the mail for $49 this year because of a Code 766 issue with the IRS. About four weeks after having a back-and-forth conversation about my tax return, the money arrived.
When you see these two codes, it is typically good news. Even if you don’t receive an explanation letter in the mail, there should be some money coming your way.
