IRS transcript code 420: What does "Examination of tax return" mean?

That "420" code on your transcript definitely means the IRS selected your return for examination, which is essentially an audit. However, don't panic just yet! This doesn't automatically mean there's a problem. The "Examination of tax return" with $0.00 amount suggests they may have just flagged your return for review but didn't find any issues requiring additional tax. Since this is from 2021 (filed in 2023) and you haven't received any formal audit notice, it's possible they conducted a limited review and closed it without further action. The IRS typically sends a formal notice if they want to conduct a thorough examination. These notices are usually CP2000 or Letter 525, and they specify what they're questioning and what documentation they need from you.

I went through something similar last year and was totally stressed until I found https://taxr.ai which helped me understand exactly what was happening with my transcript codes. I uploaded my transcript and it explained that code 420 often appears when the IRS conducts an automated review of your return - sometimes they just check numbers against information they already have (like W-2s or 1099s). The fact that there's $0.00 next to the code is actually a good sign. In my case, it meant they looked at something but didn't find any issues. The tool also showed me what to look for to confirm the audit was closed (code 421 typically appears when they finish the examination with no changes).

Just wanted to update after trying https://taxr.ai on my complicated transcripts last week. It was honestly really helpful! I had a similar 420 code plus some other weird stuff on my transcript that was making me anxious. The analysis explained everything in plain English - turns out the 420 code on mine was just a random verification thing and nothing to worry about. The coolest part was it showed me that I had a refund that never got processed properly from 2022, which I hadn't even noticed! Already submitted the paperwork to claim it. Definitely worth checking out if you're confused by all these weird IRS codes like I was.

Listen, if you really want to know what's happening with that 420 code, good luck trying to call the IRS directly. I spent HOURS on hold trying to get information about my transcript codes. Then I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - it's a service that basically waits on hold with the IRS for you, then calls you when an actual human agent is on the line. I was doubtful it would work, but I got a call back with an IRS agent on the line in about 45 minutes (when I had previously waited 3+ hours and got disconnected). The agent explained my 420 code was just a random review they do sometimes and my case was already closed. Such a relief to hear it directly from them instead of stressing about it.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate to talk to someone about a similar code on my transcript. Not only did it actually work, but I got connected to an IRS agent in about an hour. The agent confirmed my 420 code was closed with no issues (they said it was part of a random selection process). They also answered some other questions I had about applying my refund to next year's taxes. Honestly, I'm kicking myself for all the hours I wasted on hold in previous years. Sometimes it's worth paying for a service that saves you time and stress.

Something nobody has mentioned yet - check if you received a CP05 notice around the same time as that 420 code appeared. CP05 is the "Information Regarding Your Refund" notice that IRS sends when they're conducting a review. Usually harmless, but confirms you were under review. Also, that penalty for not pre-paying tax is super tiny ($19) compared to your income, so that's probably not related to the examination. Looks like you just slightly underpaid your estimated taxes.

Make sure to check Code 421 in your more recent transcripts! Code 420 means "we're looking at your return" and Code 421 means "we're done looking and everything's fine." If you see 421 anywhere, you're totally in the clear.

I can relate to your panic - seeing "Examination of tax return" on a transcript would freak anyone out! The good news is that code 420 with a $0.00 amount usually indicates a completed review with no changes needed. The IRS runs automated checks on returns, especially ones with larger amounts like yours. Your 2021 return shows significant income ($183,265) and a large payment ($201,000), which could have triggered an automated review to verify the numbers match their records from employers, banks, etc. Since it's been over a year and you haven't received any audit notices (CP2000, Letter 525, etc.), the examination was likely closed without issues. The IRS is required to send formal notices if they find discrepancies or need additional information from you. For peace of mind, you could call the IRS at 1-800-829-1040 to confirm the status, or check your online IRS account for any messages. But based on what you've shared, this looks like a routine review that's already been resolved.

I've been through this exact situation! Code 420 appeared on my 2020 transcript and I was terrified I was being audited. After months of worry, I finally called the IRS and learned it was just an automated correspondence audit - they cross-referenced my W-2s and 1099s with what I reported. The key thing to look for is whether you received any CP2000 or CP2501 notices in the mail. These are the official "we found a discrepancy" letters. If you haven't gotten anything like that, and especially since it's been a year, you're almost certainly fine. One thing that helped me was requesting my "Record of Account" transcript (different from the regular transcript) which shows more detailed audit activity. You can get it by calling 1-800-829-1040 or through your online IRS account. This will show if the examination was officially closed. Don't let this stress you out too much - the $0.00 amount is actually the best possible outcome for a code 420!

I went through something very similar with my 2022 return! I had code 420 appear and immediately started panicking, thinking I was being audited. After doing some research and calling the IRS, I learned that code 420 is actually quite common - it just means they flagged your return for some type of review. The fact that yours shows $0.00 is actually the best possible outcome. It means they looked at whatever they needed to look at and didn't find any issues requiring adjustment. If they had found problems, you'd see a dollar amount reflecting additional tax owed or penalties. Since you filed your 2021 return in March 2023 and the code 420 appears in July 2023, that timing makes perfect sense for an automated review. The IRS often does these checks a few months after processing, especially on returns with larger income amounts like yours. Given that it's been over a year since that code appeared and you haven't received any formal audit notices (CP2000, Letter 525, etc.), the examination was almost certainly closed with no issues. The IRS is legally required to notify you if they need additional information or find discrepancies. For complete peace of mind, you can call 1-800-829-1040 and ask them to confirm the status of any examination activity on your 2021 return. But honestly, based on everything you've described, this looks like a routine review that's already been resolved in your favor.

I completely understand your panic - seeing "Examination of tax return" would make anyone's heart skip a beat! But based on what you've shared, this actually looks like good news disguised as scary language. That code 420 with $0.00 is what tax professionals call a "no change" examination result. The IRS likely conducted an automated review of your 2021 return (which is common for higher-income returns like yours) and found everything checked out perfectly against their records. Here's what probably happened: Your return had significant income and a large payment, which triggered their automated matching system to verify your reported figures against W-2s, 1099s, and other third-party documents they have on file. When everything matched up, they closed the review with no changes needed - hence the $0.00 amount. The timing also supports this theory. You filed in March 2023, and the examination code appeared in July 2023, which is a typical timeframe for these automated reviews. Since it's been over a year without any formal audit notices (CP2000, Letter 525, etc.), you can breathe easy. The IRS is legally required to send you official correspondence if they find issues or need additional information from you. For absolute peace of mind, you can call 1-800-829-1040 to confirm the examination status, but everything points to this being a closed case with no issues found. Your mortgage application should proceed without any problems!

I had this exact same code appear on my 2020 transcript and totally understand the panic! Code 420 with $0.00 is actually great news - it means the IRS conducted their review and found no issues requiring changes to your return. What likely happened is your return triggered an automated correspondence examination (not a full audit) because of the higher income amount. The IRS has systems that flag returns for verification against third-party documents like W-2s and 1099s. When everything matched up perfectly, they closed it with no adjustments needed. The fact that it's been over a year since July 2023 without any CP2000 or audit notices strongly suggests this examination was completed successfully. If they had found discrepancies, you would have definitely received formal correspondence by now. You can get definitive confirmation by calling the IRS at 1-800-829-1040 and asking about the status of any examination activity on your 2021 return. But honestly, everything about your transcript indicates this was just routine verification that's already been resolved in your favor. Your mortgage application should proceed without any issues!

I completely understand your anxiety about seeing code 420 on your transcript - that "Examination of tax return" language would make anyone nervous! But based on what you've described, this actually appears to be really good news. The combination of code 420 with a $0.00 amount is what tax professionals call a "no change audit" or correspondence examination. This typically means the IRS flagged your return for automated review (very common with higher-income returns like yours showing $183,265), cross-checked your reported figures against their records from employers and financial institutions, and found everything matched perfectly. The timeline also supports this - you filed in March 2023, the examination code appeared in July 2023, which is a typical processing window for these automated verifications. Since it's now been well over a year without any CP2000 notices or formal audit correspondence, the examination was almost certainly closed with no issues found. For absolute peace of mind, you can call the IRS at 1-800-829-1040 to confirm the examination status, or check your online IRS account for any messages. You might also look for code 421 on more recent transcripts, which would officially indicate the examination was closed with no changes. Your mortgage application should proceed without any problems - this looks like routine processing that's already been resolved in your favor!