Key Takeaways
- TC 424 means your return was set aside for examination after an initial review; TC 420 means a fuller audit is underway.
- The IRS notifies you by mail (CP75/CP75A) - it never initiates an audit by phone or email, so treat those as scams.
- Newer credits (OBBBA overtime/tips deductions, 1099-DA digital asset reporting) are creating more of these flags, though most resolve at the lighter TC 424/570 stage.
- If the review clears without issues, your refund proceeds (TC 846) or gets adjusted (TC 570/Tax Topic 203) rather than escalating further.
- TC 421 confirms the audit is closed; refunds are typically issued within about 8 weeks after resolution.
- Keep your supporting records for at least three years from your filing date - that's the documentation window tax law requires.
Tax codes, topics, and notices are used across the IRS to explain what’s happening with a filer’s return, why processing is delayed or under further review, when a refund will be paid, or why it was lower than expected.
There are dozens of tax codes and notices — many are purely informational, while others require action from the filer.
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Overview of the IRS Examination/Audit Process
Some of the more worrying transcript codes are Tax Code 424 (TC 424) and Tax Code 420 (TC 420). You’ll generally see these on your tax transcript once your return has been through initial system processing.
WMR or IRS2Go will typically show a generic “your return is under processing” message when it’s under further IRS examination. You’ll usually see TC 424 before TC 420.
Once your return is placed under audit, the IRS notifies you by mail via the CP75, CP75A, or CP75D notices, discussed below.
While a review or audit likely delays your refund, an IRS audit isn’t a reason to panic if you haven’t intentionally provided incorrect information. You can normally resolve it by responding to the notice with supporting evidence, and the IRS adjusts your return/refund accordingly.
The IRS will never initiate an audit by phone or email — be very careful of scammers using the threat of an audit to try to get your personal or financial information. Always respond to the IRS via mail or the official fax number listed in your notice.
Why Did I Get Audited?
It’s understandably unsettling to get an audit notice, but there’s no need to panic — the IRS bases audits on random selection tied to various audit red flags, or because your return links to another filer or business entity under audit.
Newer credits and deductions — including OBBBA’s no-tax-on-tips and no-tax-on-overtime deductions, and Form 1099-DA digital asset reporting — have added new categories where mismatches between what’s claimed and what’s reported by third parties (employers, brokers) get flagged for review. Most of these resolve at the lighter-touch TC 424/570 review stage rather than escalating to a full TC 420 audit.
If review can’t establish eligibility for you or your claimed dependents (or someone else already claimed them), your return may get flagged for a formal audit (TC 420).
What Happens After My Return Is Under Audit (TC 424)?
Once selected, your return is sent to the IRS’s review/appeals department, and an auditor manually reviews the return and supporting documents (potentially including prior returns).
At this point, your transcript will likely show Tax Code 424, Examination Request Indicator — your return has been set aside for examination after an initial review. This doesn’t necessarily mean a full audit (there are different levels of audit), but it will likely delay your refund.
If the review finds no significant issues, it’s sent back for regular processing, including paying the refund (TC 846) or adjusting it for minor discrepancies (TC 570) or an offset (Tax Topic 203).
If the audit agent finds discrepancies warranting further investigation, your return is forwarded for a more thorough audit (TC 420). You’ll be notified by mail via CP75 or CP75A, requesting a formal interview and/or additional documentation, and telling you exactly what the IRS is examining. Confirmation these notices were sent shows up on your transcript as Tax Code 971, notice issued.
How Will the IRS Audit Me and What Do I Need to Provide?
The IRS can audit you by mail or in person. For mail audits (CP75), they’ll request supporting documentation — receipts, logs, and other records justifying claimed credits and deductions. Electronic records from your tax software may be acceptable in some cases.
Tax law requires you to keep records used to prepare your return for at least three years from the filing date.
If an in-person interview is needed (at an IRS office, your home, place of business, or accountant’s office), you’ll get a list of documents to have ready in advance. The IRS’s Audit Techniques Guides give a sense of what to expect for different types of returns.
What If You Cannot or Don’t Send Documents In?
It’s a legal requirement to respond to IRS notices. If you don’t or can’t provide the requested evidence, the IRS sends an audit report with their proposed changes — which could mean garnishing your entire refund, or owing tax and penalties due to disallowed credits.
Don’t ignore this or any other IRS notice. The IRS generally takes at least 30 days (often longer) to review documents you send, so expect a wait, and know that any potential refund will be delayed in the meantime.
How Do I Know the Audit or Examination Is Done (TC 421)?
The IRS sends another notice once satisfied you’ve proven eligibility for claimed items, or once you’ve agreed on adjusted amounts. They generally issue your refund within 8 weeks, subject to other debts or offsets.
Tax Code 421 on your transcript confirms the audit was closed. If your refund was adjusted as a result, you’ll also get a letter explaining the adjusted amounts and any tax owed or corrected refund.
What Happens If I Amend My Return?
An amended return is a separate submission — filing one doesn’t affect the audit selection process of the original return. Amended returns go through their own screening and can also be selected for audit.
