Does IRS Reference Number Code 1242 Mean My Tax Return is Getting audited? Will My Refund Be Delayed

After submitting your tax return you may see the following message with reference to code 1242 and Tax Topic 151 on the IRS status checking tool or your online account which says your return is being reviewed.

Naturally when seeing this many taxpayers may get stressed and worried about what’s going to happen next. Read on to see what this means, next steps and expected timeline.

IRS Reference 1242 (Return under review)
IRS Reference 1242 (Return under review)

What does Reference Number 1242 mean for refund status?

Reference number codes are how the IRS systems classify informational or processing actions, much like tax transcript codes.

According to the IRS manual, Code 1242 essentially means, your return was received but is frozen (from any further actions) and under review. So while this does create a sense of panic, don’t get overly stressed as the IRS routinely reviews tax returns for errors and potential fraud.

There is not much you can do at this stage as you will need for the IRS to get back to you via a formal notice. which is normally a CP05 Letter to verify some of the information in your tax return filing.

But it does mean your tax filing is under review and in queue for further actions. The level of review, or audit, will determine next steps and the duration of your wait.

How can I get more information?

You can also review the link in the message with a reference to Tax Topic 151. This will confirm the process the IRS uses to signify the next processing stage and what your options are to appeal the proposed adjustments or proposed/taken collection action.

There may be situations where you also need to visit a local taxpayer office to verify your identify or undertake a more detailed in-person audit.

You should also check your IRS tax transcript for more information and other codes. Eg. transcript code 420 means you will be facing an actual audit.

How long will it take?

Once you see this message it could take several weeks (up to 120 days) for the IRS to get back to you and complete their review. If your issue is complex and you lodge an appeal, the whole process could take months.

During this process they may request additional information via formal notices, that you should promptly respond to.

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