IRS Code 420 & 421: Examination Indicator (420) / Reverse Examination Indicator (421)
IRS code 420 means your return has been referred to the IRS Examination (audit) or Appeals function for possible review; code 421 means that examination indicator was reversed, often because the review was closed.
What code 420 / 421 actually means
Document 6209 describes transaction code 420 as the Examination Indicator: it shows the return has been referred to, or assigned in, the Examination or Appeals division. The Taxpayer Advocate Service puts it as the return being "under examination consideration." It can post before anyone has contacted you.
A 420 does not mean you did something wrong. The IRS says selection for an audit does not always suggest there's a problem, and that if your account is selected it will notify you by mail and will not start an audit by telephone. Many audits are handled entirely by mail.
Code 421 reverses the 420. Document 6209 says it is generated when an examination result (TC 300) posts with certain closing codes, or it can be entered directly. A 421 tells you the indicator was removed, but it does not tell you the outcome; check whether a 300 posted with it and read the closing letter.
What to do next
- 1Watch your mail. The IRS starts audits by letter, not by phone; be wary of unexpected calls claiming to be an audit.
- 2If you receive an exam letter (for example a CP75 for EITC/ACTC), respond by the deadline with the documents it asks for and keep copies.
- 3If a 421 posts, look for a 300 line and its amount, and keep the IRS closing letter with your records.
- 4Gather records that support your income, deductions, and credits for that year now, before a deadline is running.
- 5If an exam letter arrives, a tax professional can help you respond completely the first time; we offer a free consultation.
Codes it often appears with
Under IRS rules, a credit balance on a module with an open 420 can generate a 570 hold.
Code 300
Additional tax or deficiency assessed by Examination; often posts when the exam closes.
Reverses the 420 examination indicator.
A notice or letter issued during the process.
Letters that often go with it
Common questions
Does code 420 mean I'm being audited?+
It means your return was referred to Examination or Appeals for possible review. The IRS will notify you by mail if an audit actually starts, and it does not initiate audits by phone.
What does code 421 mean?+
421 reverses the 420 examination indicator. It is often generated when the examination is closed. Check whether a 300 (exam assessment) posted with it and read your closing letter to learn the result.
Will a 420 hold my refund?+
It can. IRS rules allow a 570 hold when there is a credit on a module with an open examination indicator, and a CP75 audit notice says the IRS holds the EIC, ACTC, and/or RRC parts of a refund until the audit results are in.
Does a 420 mean I will owe more tax?+
Not necessarily. The IRS says selection for an audit does not always suggest there's a problem. If the review ends with a change, you would typically see a 300 (exam assessment) and receive a letter explaining it.
Checked against IRS primary sources — see how we source these guides. Transcripts show what has posted, not every action in progress; notices mailed to you and your IRS online account are the controlling record.
Other transcript codes
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