What Does TC 661 Mean on an IRS Transcript?
Learn what IRS Transaction Code 661 signifies on your transcript. It indicates an administrative transfer of funds between tax years to settle an account.
The Internal Revenue Service (IRS) uses a system of transaction codes to log all actions on a taxpayer’s account transcript. These codes create a history of everything from a filed return to a refund issuance. One code that may appear is Transaction Code (TC) 661, which signals that the IRS has moved funds from a taxpayer’s account.
What TC 661 Means
Transaction Code 661 signifies an “Overpayment Transfer-Out.” This means the IRS has moved a credit or overpayment from one tax account to another, most frequently to offset a tax debt. For instance, if a taxpayer is due a $2,000 refund for the 2023 tax year but owes $1,500 for 2021, the IRS will use TC 661 to transfer $1,500 from the 2023 account to cover the liability.
When this transfer occurs, a corresponding code, TC 660 (“Overpayment Transfer-In”), will appear on the transcript for the tax period receiving the funds. The TC 661 entry will show a debit from the overpayment account, while the TC 660 will show a credit to the account with the outstanding balance.
Finding the Transfer on an IRS Transcript
To trace this transaction, a taxpayer must review their account transcripts for multiple years. The transcript for the tax year from which the money was taken will display TC 661, the date of the transfer, and the dollar amount moved. The amount will have a minus sign next to it, indicating funds were removed.
To see where the funds went, the taxpayer must obtain the account transcript for the year the IRS applied the payment to. On that transcript, they will find TC 660, “Overpayment Transfer-In,” with the same transaction date and dollar amount. This confirms how the overpayment from one period was used to satisfy a liability in another.
Actions to Take After the Transfer
Upon noticing a TC 661 on a transcript, you should verify the transfer’s accuracy. Review your records for the tax year that received the funds to confirm you were aware of an outstanding debt. The transfer should resolve or reduce the balance owed on that older account, which you can confirm by checking the updated balances on both transcripts.
The IRS will also send a formal letter explaining the offset in detail. This notice explains why the refund was transferred and shows the remaining refund amount, if any. If you believe the transfer was made in error or was applied to a debt you do not recognize, contact the IRS using the phone number provided on the notice.