IRS Tax Topic 151 Explained
There are a few outcomes you may experience after filing your federal income tax return with the IRS. Depending on how much your tax liability amounts to after you have taken your earnings, withheld tax from the year, tax credits, and tax deductions into account, you may owe money to the IRS, be balanced, or in the cases that you have overpaid your taxes, you may be eligible for a tax refund.
TABLE OF CONTENTS
- Tax topic 151 is an IRS letter that informs taxpayers that some or all of their tax refund has been offset to pay for something else they owe, and therefore, they will not be receiving their full tax refund for the current tax year.
- The most common reasons that someone will receive a tax topic 151 letter in the mail are due to unpaid tax debt, unpaid federal student loan payments, or unpaid child support payments.
- If you disagree with the decision on tax topic 151, you can choose to protest the letter by meeting for an appeals conference with The Independent Office of Appeals or you can file an appeal directly to the courts.
- In 2020, an estimated 3.3 million Americans had overdue child support debt that resulted in many of them not being considered eligible for the Coronavirus stimulus check payments.
What Is Tax Topic 151?
Tax topic 151 is an IRS letter that informs taxpayers that some or all of their tax refund has been offset to pay for something else they owe, and therefore, they will not be receiving their full tax refund for the current tax year. If you receive this tax notice stating your tax refund will be reduced or withheld entirely by the Department of Treasury to be applied towards debts that you owe.
Within the IRS tax topic 151, the IRS will provide a message explaining the reason why money has been deducted from the taxpayer’s refund. The most common reasons that someone will receive a tax topic 151 letter in the mail is due to accumulated debt from unpaid taxes, unpaid federal student loan payments, or unpaid child support payments.
The tax topic 151 documentation will also provide information about how the taxpayer must move forward to resolve the notice.
When a taxpayer receives tax topic 151 from the IRS, they must look into the reason their tax refund is being offset and determine if they agree with the notice or not. If they do agree with the notice, they can move forward with steps to get the tax issues resolved. If the taxpayer does not agree with the statement, they will have the chance to protest the notice and take the case to the appeals court.
Tax Topic 151 Appeal Options
There are generally two options that taxpayers can choose between when they learn about the offsetting of their tax refund, including appealing to the IRS directly by contacting the Independent Office of Appeals to set up a conference and filing a court case.
Filing An Appeal With The IRS Directly
If you find an error in the IRS tax topic 151 and believe that you should be eligible to receive your full tax refund, one step to resolving this tax problem will be to file an appeal with the IRS. While the appeals correspondence can be taken care of over the phone, many times, visiting your local Appeals office will allow you to begin the appeal process.
The first step to request an appeals conference in the instance of tax topic 151 is usually to file a small case request or a formal written protest with the appropriate office that was outlined in the IRS letter you received in the mail.
If you choose to pursue the option of filing a formal written protest, it is important that you read your IRS letter carefully, as there will be a given window of time in which you must send your response. This timeline will be outlined in your IRS letter, but it is usually 30 days from the time that the IRS letter was dated.
The following information should be included in a formal written protest:
- Provide your full name, address, and phone number that is easiest to reach you at.
- Clearly state your intention to appeal the IRS findings to the Appeals Office.
- Include a copy of the IRS letter that outlines the findings you disagree with.
- Indicate which tax periods or years are relevant to your dispute.
- List the specific actions or changes you object to, and provide detailed reasons for your objections.
- Include any evidence that supports your claims.
- Mention any laws that your argument relies on.
After a written notice has been outlined with all of the required information, the taxpayer will need to provide their signature at the bottom of the document and send it to the correct office within the designated time frame.
A small case request is more appropriate than a formal written protest when the total amount is less than $25,000. Similar to the other appeals approach, the instructions for how to file a small case request will be outlined in the IRS letter. Usually, the taxpayer will need to file IRS Form 12203, or Request for Appeals Review, with an outline of what you disagree with in the letter.
Upon receiving your submission, The Independent Office of Appeals will contact you to arrange a date and time that will be convenient to meet for an appeals conference. Appeals conferences are informal meetings that are usually held in person but, in certain cases, can also be conducted over the phone or through written correspondence. Taxpayers have the choice to represent themselves in the appeals conference, or if they choose, they can bring an authorized attorney or certified public accountant (CPA) to negotiate on their behalf.
Filing An Appeal To The Courts
Filing an appeal to the courts can be an option if you have already tried and failed to reach a resolution at an appeals conference, or if you prefer to bypass the appeals conference altogether and appeal directly to the court system. In this case, there are three potential institutions to which you could appeal your case: The U.S. Tax Court, the U.S. Court of Federal Claims, or your U.S. District Court.
Frequently Asked Questions
Are All Tax Brackets Taxed The Same?
No, each tax bracket has a different tax rate.
Are Tax Evasion And Tax Avoidance The Same?
While tax avoidance is the process of minimizing your taxable income through legal methods, tax evasion is the illegal underpayment or failure to pay taxes.
What Is The Purpose Of Tax Reform?
The purpose of tax reform is to improve the efficiency of the tax collection process to provide social or economic benefits.
What Is Tax Relief?
Tax relief is a government-installed program aiming to help businesses and individuals reduce their tax burdens. A tax deduction or tax credit is an example of tax relief.
Tax Haven Vs. Tax Shelter
The use of tax havens is primarily by wealthy individuals and big corporations as a way to decrease their tax burden in their home country, while tax shelters are lawful methods that utilize investment options to decrease tax liability.
What Does 'Tax Exempt' Mean?
Tax exemptions are items removed from tax, such as certain income, revenue, or potentially, taxpayers.
An item is tax-deferred when the taxes are not collected until the funds are withdrawn.
What Is Tax-Advantaged?
‘Tax-advantaged’ refers to investments, financial accounts, and saving plans that offer tax benefits such as being exempt or deferred from taxation.
What Is Tax-Free Income?
Income is tax-free or nontaxable when the income earned is not subject to tax.
If you have received an unexpected Tax Topic 151 notice from the IRS and feel unsure about how to move forward, a tax professional such as the licensed CPAs, tax attorneys, and IRS enrolled agents at Ideal Tax can offer you guidance on how to approach a tax solution. Set up a free consultation with us today to have all of your questions answered about the IRS tax code, how you can settle with the IRS, and how to maximize your savings this tax season.
We also offer tax preparation services here. Contact us today at 833-321-1273.