IRS Transcript Codes That Signal an Audit Is Coming
- Parker Franklin
- Jan 1
- 3 min read
Updated: Jan 4
Short answer first: Certain IRS transcript codes often appear before an audit notice arrives. These codes signal IRS review activity, data mismatches, or pending examination steps. Spotting them early gives Texas taxpayers time to prepare and respond strategically.
For individuals and business owners in Clear Lake, Houston, League City, and along Bay Area Blvd, transcript monitoring is one of the most overlooked audit-prevention tools.
Table of Contents
What Are IRS Transcripts and Codes?
IRS transcripts are internal IRS records. They summarize return data, payments, and enforcement activity.
Transcript codes are numeric markers. Each code reflects an IRS action or status change.
Audits rarely start without transcript movement. That makes codes early warning signs.
Which IRS Transcript Codes Signal an Audit Is Coming?
Not every code means trouble. Some deserve immediate attention.
What Does Code 420 Mean?
Code 420 indicates an examination referral. This often precedes an audit assignment.
It does not confirm an audit. It strongly suggests one is being considered.
What Does Code 424 Mean?
Code 424 means the return was selected for examination. This is one of the clearest audit indicators.
Audit notices often follow within weeks. Preparation should start immediately.
What Does Code 922 Mean?
Code 922 reflects an audit reconsideration or adjustment. It often appears during active review periods.
This code suggests deeper IRS involvement. Professional guidance becomes critical.
What About Code 971 or 570?
Code 971 indicates an IRS notice was issued. Code 570 shows a temporary processing hold.
Together, they often precede audits or CP2000 actions. They should never be ignored.
Why Do These Codes Appear on My Transcript?
Audit-related codes appear due to mismatches or risk factors.
Common triggers include:
Income reported differently than IRS records
Large deductions relative to income
Business losses or Schedule C activity
Stock sales or retirement distributions
Houston aerospace professionals and medical contractors often trigger codes due to multiple income sources.
How Does This Affect Texas Taxpayers Specifically?
Texas has no state income tax. Federal audit rules still fully apply.
Texas-specific factors include:
Community property laws for married taxpayers
Shared income allocation issues
High self-employment rates
Married business owners in Texas often see transcript codes tied to income allocation questions.
Clear Lake and League City taxpayers commonly encounter codes related to deductions and vehicles.
What Should You Do If You See These Codes?
Do not panic. Do not wait.
Action Steps:
Pull all IRS transcripts immediately
Identify audit-related codes
Match codes to tax year activity
Organize documentation early
Consult a tax professional before notices arrive
Early action preserves options. Late reactions limit control.
FAQ: IRS Transcript Codes and Audits
Do transcript codes guarantee an audit?
No. They signal risk, not certainty.
How often should I check my IRS transcripts?
At least annually. More often for business owners.
Can codes disappear without an audit?
Yes. Some reviews resolve internally.
Should I contact the IRS when I see these codes?
Not immediately. Strategy matters more than speed.
Final Thoughts
IRS transcript codes are signals, not sentences. They provide time most taxpayers never use.
Houston-area taxpayers who monitor transcripts gain:
Preparation time
Better outcomes
Lower stress
Awareness creates leverage. Silence creates surprises.
Want Help Reading Your Transcripts?
Schedule a 15-minute Tax Discovery Call with Parker Franklin Tax LLC. We are located at 16821 Buccaneer Lane, serving Clear Lake, Houston, League City, and surrounding Bay Area communities. Use the button below to reach out and lets discuss your options and your next best move.
This article provides general information and is not legal or tax advice. Transcript interpretation depends on individual facts and IRS activity.
