When the IRS puts your return under a microscope

There are dozens of transcript codes taxpayers research every year, but one inspires more fear than any other:

TC 420 — “Examination/audit of the tax return.”

If you see Transaction Code 420 on your IRS Account Transcript, it means one thing with absolute certainty:

You are under an IRS audit, your return is being examined, and your refund is officially frozen.

This is not a soft review.
Not a computer match.
Not a generic hold.
This is a formal audit.

Let’s break down what TC 420 means — and how to respond strategically and immediately.

What TC 420 Really Means

When TC 420 appears, it signals:

• a human audit has been assigned
• your return will be manually reviewed
• supporting documents will likely be requested
• your refund cannot be issued
• further IRS notices are coming

Often, TC 420 is accompanied by:

• freeze code “A” — audit freeze initiated
• TC 570 — refund hold
• TC 424 — examination request before 420 appears
• TC 971 — notice issued
• CP75, CP2000, or official audit letter — depending on audit type

TC 420 means the IRS is not just questioning a single number — they are evaluating your return as a whole.

What Triggers a TC 420 Audit?

Common triggers include:

• unusually high credits
• large refund claims relative to income
• business losses year after year
• suspicious or inconsistent deductions
• reporting zero income with refundable credits
• dependent claim conflicts
• mismatched 1099 or W-2 data
• self-employment income irregularities
• large cash-based income professions
• recurring amended returns
• past identity fraud flags

Audits can be targeted or random — but TC 420 always means the same thing:
the IRS wants proof.

The Most Important First Step: Do NOT Panic

TC 420 is serious, but you are not powerless.

Many audits end with:

• no additional tax owed
  or
• small adjustments

Some taxpayers even emerge with larger refunds.

But outcomes depend heavily on how professionally and correctly you respond.

What You Should Do Immediately

1) Gather Documentation

Depending on your situation, begin collecting:

• W-2s and 1099s
• pay stubs
• business expense logs
• receipts and invoices
• tip records
• mileage logs
• proof of dependents
• bank statements
• proof of deductions
• health insurance statements
• Form 1098-T or education records
• charitable donation receipts

The more organized, the better.

2) Wait for the Audit Letter

You will eventually receive:

• CP75
• CP2000
• Letter 3219
• Letter 566
• or another formal audit request

This letter will list exactly what the IRS wants.

Never guess — wait for the official request.

3) DO NOT call the IRS to defend yourself verbally

IRS phone agents cannot:

• review audit documentation
• make decisions
• clear TC 420
• release refunds

Audits are handled by dedicated audit examiners — not phone reps.

4) Consider Hiring a Tax Professional

This is where expertise matters.

A licensed professional can:

• communicate directly with the IRS
• compile support documentation
• represent you during the audit
• negotiate outcomes
• prevent disclosure mistakes

If you receive TC 420, especially involving large credits or self-employment income, professional representation is strongly recommended.

What NOT to Do

Do NOT:

• ignore the audit notices
• throw away letters
• delay response
• send disorganized documents
• argue emotionally
• claim deductions without proof

Audits are documentation-driven.
The IRS operates strictly on evidence.

How Long the Audit Will Delay Your Refund

TC 420 means your refund is frozen until:

• the audit is completed
  and
• the IRS issues findings

This can take:

• 2–3 months for correspondence audits
• 6–12 months for full audits
• longer if documents are missing or delayed

There is no faster option.
TC 420 is non-negotiable.

Best-Case, Neutral, and Worst-Case Outcomes

Best Case:
The IRS accepts your documentation and releases your refund.

Neutral Outcome:
You owe a small adjustment, refund reduced.

Worst Case:
IRS assesses additional tax + penalties + interest.

In extreme cases, IRS may expand audit to prior years — but this is uncommon.

How to Survive the Audit With Minimal Damage

• be prepared
• be honest
• be organized
• be punctual
• be professional

Audits are won with proof, not persuasion.

Seeing TC 420 on your transcript feels like a doomsday alert — and it’s understandable.
But with proper documentation, professional handling, and timely action, most audits are manageable.

TC 420 is the IRS asking:
“Can you support the numbers you filed?”

If the answer is yes — and you can prove it — you will get through this successfully.