What Does IRS Code 290 Mean on Your Tax Transcript?

If you've been reviewing your IRS transcript and noticed Transaction Code (TC) 290, you may be left wondering, what exactly does this mean?

Let’s clarify it:

IRS Transaction Code 290: What It Means

IRS Transaction Code (TC) 290 is a “multiple use” code, and it can indicate a few different things depending on the context. Most commonly:

• Disallowed Claim: In cases like the Employee Retention Credit (ERC) or the Self-Employed Sick & Family Leave Credit (SETC), a TC 290 may mean that the IRS has denied or partially disallowed your claim.
• Additional Tax Assessment: It may also mean the IRS believes you owe additional tax, often triggered by audit findings, document mismatches, or amended returns.

But here’s where it gets tricky:

If TC 290 shows a $0.00 balance, it doesn’t necessarily mean extra tax is due. It could simply reflect an internal adjustment or that a hold has been released on your account.

How Can I Tell What It Means for Me?

If you see Code 290, here’s what to look for:

1. Is there a dollar amount listed?
   
   • If it says $0.00, it may just be a placeholder code that indicates there has been some movement on your account. You should still wait for a letter from the IRS explaining what they did or wait for further updates to your transcript. 
   • If it shows a dollar amount, the IRS may be saying you owe more tax.
2. Are there other codes near it?
   
   • Other codes (like 971 or 846) can give clues. For example:
     
     • Code 846 means a refund was issued.
     • Code 971 means a letter is being sent to you.
3. Did you file for a special credit, like the ERC or SETC?
   
   • If so, and you see Code 290, it could mean the IRS is disallowing part or all of your claim.
   • They’ll send you a letter explaining the details, so keep an eye on your mailbox!

What Is a “Partial Disallowance”?

This just means the IRS approved part of your claim, but not all of it. For example, if you asked for a refund based on 50 days of leave and the IRS only agreed with 20 of them, they’ll send you a smaller check and a letter saying why the rest was denied.

Understanding Your Appeal Rights

If you receive a notice from the IRS disallowing part or all of your claim, you don’t have to accept it at face value. If you disagree with the IRS notice, you have rights to challenge their decision:

• You can file an appeal or submit a written explanation with supporting documents to request reconsideration.
• There are strict deadlines for appeals, usually listed on the notice, so read carefully and act quickly.
• In many cases, a well-organized, professional response can result in a full or partial reversal.

Having an experienced tax professional on your side can make all the difference when preparing a response or deciding whether an appeal is worth pursuing.

What Should You Do?

• Wait for the IRS letter. That will explain everything in plain terms.
• Don’t panic - but don’t ignore it either. If you disagree with the IRS decision, you may have the right to appeal.
• Talk to a tax professional. Interpreting IRS codes and letters can be confusing, and it's easy to make mistakes or miss a deadline. A pro can help make sense of it all and guide you on what to do next.

Why Work with an Enrolled Agent?

When facing IRS codes like TC 290 or navigating the appeals process, working with an Enrolled Agent (EA) can be a game-changer. Enrolled Agents are federally licensed tax professionals who are admitted to practice before the IRS and represent taxpayers in all 50 states - including during audits, appeals, collections, and other tax matters.

Unlike many tax preparers, EAs are required to demonstrate in-depth tax expertise and uphold strict ethical standards. They are uniquely qualified to help you interpret IRS transcripts, respond to confusing notices, and fight for the tax credits and refunds you deserve. Whether you're dealing with a disallowed claim or a complex adjustment, an Enrolled Agent can provide the clarity, confidence, and strategy you need to move forward.

At Freedom Tax Strategies, we help people just like you navigate the IRS, understand confusing codes, and fight for the refunds they deserve. If you’ve seen Code 290 on your transcript or got an IRS letter you don’t understand, Contact us today so we can figure it out together. We are here to help you every step of the way!