An IRS Code 766 on your tax transcript is good news. Code 766 means that you have a credit on your account, which might be the result of a refund, an overpayment from a previous year, or a credit from the current year’s return. In any case, it means that your tax liability has been reduced.
If the code 766 is unexpected, you will receive a letter from the IRS explaining the change to your account. The IRS sends written communication about any change to your return after it has been filed.
What is IRS Code 766?
An IRS Code 766 on your account means that you have received a credit on your account from the IRS. A credit on your account is a dollar-for-dollar reduction in your tax liability. If you have more credits than your tax liability, you will receive a refund for the overpayment. If your credits do not cover your balance due, you will need to make payments on the balance.
Possible Refund Credits
There are several reasons you may have a refund credit on your transcript. We’ve listed some of the most common reasons below, but the credits change each year so this list may change too.
Refundable Credit (Overpayment)
If you expect your income to go up in the year after you file your return, you may apply the overpayment to the next tax year. These overpayments will show up on your transcript as a credit with a Code 766 designation.
Child Tax Credit
Prior to 2021, the child tax credit was only partially refundable. The amount that was eligible for refund was $1,400 per child. The rules changed in 2021 and allowed the total amount of the credit to be refundable. Additionally, in 2021, the amounts of the child tax credit were temporarily increased to $3,600 for children under the age of 6 and $3,000 for children under 18.
Earned Income Tax Credit
The earned income tax credit, or EITC, is a tax credit available to eligible taxpayers who have earned income from working. The credit can be worth up to $6,042 for filers with three or more qualifying children, making it one of the largest tax credits available. To qualify, taxpayers must meet certain income and other requirements.
Though we’ve listed the most common credits above, there are several other tax credits that might appear on your return. These credits include the lifetime learning credit, American Opportunity Tax Credit, adoption credit, recovery rebate credit, dependent care credit, saver’s credit, and residential energy credit.
When Will My Refund Credit Arrive?
You can always check the specific timing of your refund on the IRS’s Where My Refund tool. You can expect to receive a direct deposit refund within 2-3 weeks of the IRS processing your return. For paper checks mailed to domestic addresses, you should receive your refund within 3-4 weeks. If you have not received your refund check within 6 weeks you can call the IRS and request a replacement check.
What Does the Date Next to Code 766 Mean?
The date next to Code 766 is the date the credit is applied to your account. For overpayments, this will be the date that the prior year’s return was due. Other credits will be put on your account when the return is processed.
If you see a credit on your account that you weren’t expecting or you are missing a credit you expected, then you should follow up on your account with the IRS.
Call the IRS
You can call the IRS at 1-800-829-1040. Wait times can be hours long during certain parts of the year so be prepared to wait to speak with an agent. You should be ready to verify your identity and explain the issue. The IRS will often request a written explanation of the issue before they will make an adjustment to your account.
Contact Your Local IRS Office
If you need immediate assistance, you can make an appointment with your local IRS office. They can often resolve issues on the same day if you bring a written explanation of your case and have backup documentation to support your argument.
Contact the Taxpayer Advocate Service
If you have been waiting for a resolution on your account but have not made any headway with the IRS, you can contact the Taxpayer Advocate Service. The Taxpayer Advocate Service is a department of the IRS devoted to getting issues resolved for taxpayers.
Contact a Tax Professional
For additional assistance, you can contact a tax professional who has experience resolving issues with the IRS. The professionals at Tax Shark have decades of experience dealing with the IRS.