What Does IRS 806 Code Mean on a Tax Transcript?
IRS code 806 on a tax transcript confirms the total federal tax withheld from your income, a key credit that impacts your refund or amount owed.
The Internal Revenue Service uses three-digit transaction codes to document all activity on a taxpayer’s account, from tax assessments and payments to adjustments and credits. Understanding these codes is helpful for interpreting an IRS tax transcript. IRS transaction code 806 is a common entry that appears after a tax return is filed and processed.
Defining the Withholding Credit
IRS code 806 represents a “Credit for Withheld Taxes and Excess FICA.” This figure is the total amount of federal income tax withheld from your income sources during the tax year. It is not a refund amount itself, but a credit for taxes you have already paid, which is then used to calculate your final tax obligation or refund.
The most common source for this withholding is from an employer, as reported in Box 2 of a Form W-2. Other sources contribute to this total, including federal income tax withheld from retirement distributions on Form 1099-R, certain government payments, and nonemployee compensation on Form 1099-NEC. The amount next to code 806 is the sum of all federal tax withheld from these documents.
Locating the Code on a Tax Transcript
To see this code, you must obtain an IRS account transcript, which provides a chronological log of all transactions on your tax account for a specific year. You can request this document online from the IRS website, by phone, or by mail. Within the transcript’s “Transactions” section, code 806 will appear once your tax return has been processed.
On the transcript, code 806 functions as a credit against your total tax liability for the year. You will also see code 150, which establishes the “Tax on Return” or the total tax you are responsible for. The code 806 amount, often shown as a negative number, is applied to your account, reducing the tax liability shown by code 150. This calculation determines whether you will receive a refund or have a balance due.
Action Steps for Incorrect Amounts
If you suspect the amount associated with code 806 on your transcript is incorrect, a verification process is necessary. The first step is to gather all of your year-end income statements, such as every Form W-2 and Form 1099 that reports income and withholding. These documents are the source data for the code 806 entry.
Next, carefully review each form and locate the box that specifies the amount of federal income tax withheld. For a Form W-2, this is Box 2; for a Form 1099-R, it is Box 4. Add together the federal withholding amounts from all of your documents to arrive at a total. Compare this calculated total directly to the dollar amount listed next to transaction code 806 on your IRS account transcript.
Should you find a discrepancy between your calculated total and the transcript amount, the issue likely originates from an error on one of the source documents. The appropriate action is to contact the employer or payer who issued the specific W-2 or 1099 that you believe is incorrect. They may need to issue a corrected form, which would then need to be reflected in the information the IRS has on file.