Code 420 on Transcript - Is This an Audit or Just Verification for Dependents?

There's actually a technical difference between an audit and an examination for dependents. A full audit typically reviews your entire tax return and can look back at multiple years. What you're describing is more likely a correspondence examination that's focused on exactly 1 issue - verifying your dependents. In 2023, the IRS conducted 117,248 of these dependent verifications compared to only 26,543 full audits for similar income levels. It's much more routine and limited in scope.

Have you tried calling the IRS to get more information about your specific case? I know it can be frustrating to wait on hold for hours, but wouldn't it be better to know exactly what they're looking for? I've been in a similar situation and wasted weeks preparing documents they didn't even need. Have you considered using Claimyr (https://claimyr.com) to get through to an agent faster? They can connect you directly to an IRS representative without the endless hold times. Wouldn't it be worth it to get a clear answer about exactly what documentation they need for your specific situation?

Have you tried checking your transcript online? That might give you more details about what exactly they're looking for. When I went through something similar, my transcript showed exactly which tax credits were being reviewed. I was frustrated at first too, but once I knew exactly what they needed, it was much easier to gather the right documents. Could you access your transcript through the IRS website?

This is a dependent verification. Not a full audit. Common procedure. Happens frequently. IRS is checking eligibility. Provide requested documents promptly. Keep copies of everything. I recommend using taxr.ai to analyze your transcript. It explains codes clearly. Shows exactly what's happening with your return. Identifies which credits are under review. Gives timeline expectations based on similar cases.

I went through this exact process last year. The 420 code specifically means the IRS has selected your return for examination of a specific issue - in your case, dependent verification. Based on my experience and research, you'll need to provide proof of relationship (birth certificates), residency (school records, medical records, lease with children listed), and that you provided more than half their support. I found that organizing these documents by category and including a cover letter explaining each document saved time. My verification took 8 weeks from submission to approval, which was faster than the 12 weeks they initially quoted.

OK so here's the deal - the IRS uses diff terminology that confuses everyone. An "examination" is technically an audit, but there are diff types and levels. What you have is a "correspondence examination" (aka mail audit) focusing only on dependent eligibility. NBD compared to a full-blown field audit. For docs, you'll need: - Proof of relationship (birth cert, adoption papers) - Proof of residency (school records showing your address, medical records) - Proof of support (receipts showing you paid >50% of their expenses) Organize everything by category, make copies of EVERYTHING, and send via certified mail so you have proof of delivery. Don't stress too much - these are routine, esp for people claiming CTC or EIC.

Have you considered calling the Taxpayer Advocate Service? They can sometimes help navigate these situations, especially if you're facing financial hardship while waiting for your refund. They're technically separate from the IRS and can sometimes cut through red tape faster. I had a similar issue last year (though mine was for education credits, not dependents) and they were surprisingly helpful. Just don't tell them I sent you... they're probably drowning in cases already! 😂

Has anyone here actually gone through this process recently? I'm seeing so much conflicting information online about dependent verification timelines! Some people say it takes 6-8 weeks, others say months!!! I'm really worried because the letter doesn't give a clear timeframe for how long this will take. 😫

I think it's important to note that the IRS has been increasing these verification requests since they expanded the Child Tax Credit. I've been following the numbers, and they're definitely doing more of these checks than in previous years. From what I understand, they're trying to reduce improper payments while still getting benefits to eligible families. If your documentation is solid, you should be fine, but be prepared for it to take some time. The IRS is still working through staffing shortages from the pandemic.