Occasionally, you will see the IRS code 420 on your 2022/2023 tax transcript. But what does IRS code 420 mean on your transcript?
That is exactly what this guide is about.
We will show you what code 420 means on the IRS tax transcript.
If you had IRS Code 420 Examination of Tax Return on your transcript, then you do not need to worry.
It is because there is no cause for worry.
We have received numerous messages from some of our readers who also have the Examination of Tax Return code on their transcripts.
Some of them even took to Reddit for answers, and, frankly, I feel the frustration you may be going through if you are also in the same situation with TC 420.
The code could mean a lot.
Please note that this post is purely for educational purposes and does not claim to have any tax expertise. Neither do we have any authorization or association with the IRS.
That being said, you should not rely solely on this guide concerning your taxes since each state has different laws.
What Does Code 420 Mean According To IRS Pocket Guide
According to the Internal Revenue Service Master File Codes, the definition or meaning of IRS Code 420 is Examination Indicator.
In other words, code 420 means Examination of Tax Return.
The tax transaction code 420 on your 2023 transcript means your return was pulled for a possible audit. Your tax return is undergoing a review or examination.
Please note that it may or may not have been assigned for an audit in person or through correspondence.
When an amended return is sent to a human for a review or examination, all you need to do is wait patiently.
When you get code 420 on your transcript, the IRS will either process the return, or you may get a letter to respond to.
If your return is under review, then it could take a few weeks to get resolved, and you may actually be required to provide further and better particulars to the IRS.
When you get tax code 421, then it means the audit was closed.
If you are still confused, you can request for a literal transcript which normally explains briefly what each transaction code means.
Watch the video below to learn some tips to avoid tax return errors:
Meaning Of Code 420 According To The Internal Revenue Service Master File Codes
Below is the explanation given by the Internal Revenue Service for the IRS code 420:
Computer generated at SC when opening record is posted. Can be input on Form 3177. Indicates that return has been referred to the Examination or Appeals Division. Generally, if TC 420 is unreversed, TC 290, 291, 298, and 299 will unpost unless Priority Codes 1, 5, 6, 7, or 8 are present. (See UPC 160, 330) Module will not be removed from MF. TC 290 with zero amount, 294 or 295 will post. (TC 294, 295, 298, 299-BMF/IMF only.)
The return has been assigned to the Examination or Appeals Division.
That is the whole meaning of the tax code 420 on the transcript.
But what does that mean in simple terms?
What Does IRS Code 420 Mean On 2022/2023 Tax Transcript?
You have seen the explanations given by the Internal Revenue Service with respect to TC 420.
For most of you who are used to the IRS Pocket Guide and the Master File Codes, the explanations above will not be much of a difficulty.
For those who still do not understand all of that, here is what the IRS code 420 means in simple terms:
The Tax Code 420 means Examination Indicator and reflects that a return is under examination consideration.
However, the return may or may not ultimately be audited.
So, 420 is an audit code which means an Examination indicator.
The fact that it is an audit code does not necessarily mean an audit will be carried out all the time.
A transaction code 420 means the return was pulled for a potential audit.
The return will then be reviewed and may or may not necessarily be assigned for audit (in person or through correspondence).
You get another code 421 on your tax transcript when an audit is carried out.
Tax code 421 would indicate that the audit was closed.
You can request a literal transcript that provides a brief written explanation of each transaction code.
What To Do If You Need Further Details
For most people, you may not need to worry that much about TC 420.
If you, however, need further details about your tax transcript, it is always advisable to contact the Internal Revenue Service representatives for clarification.
For further clarifications, please contact the IRS on phone 800-829-1040 (Individuals) and 800-829-4933 (Businesses) from 7 am to 7 pm local time.
Alternatively, you can consult a reliable tax professional who can actually review all your documentation and obtain a complete transcript from the Internal Revenue Service.
That is all you need to know about the IRS code 420 on the 2022/2023 tax transcript.
Here is the list of other IRS codes and their ultimate guides:
Check through them for further details on the tax codes.