TC 424: Examination Request Indicator

What the code actually does

TC 424 records a request. IRS Document 6209, Section 8A defines it as "return referred to Examination or Appeals Division" and records that it "generates Examination opening inventory information." The case is being opened on the examination inventory system; it is not yet assigned to anyone.

The most informative clause is the third: it "deletes record, if present, from DIF file." The Discriminant Function file is the pool of scored returns from which audits are selected. A return leaving that pool has stopped being a candidate and started being a case. That is a genuine change of state, and it is why this code is worth reading as a signal rather than as noise.

It is the earliest warning a practitioner gets

This is usually the first thing on a transcript to suggest an examination, and it can appear well before any correspondence. A practitioner who pulls transcripts as a matter of routine on new engagements will sometimes find a TC 424 on a client who has heard nothing and believes the year is closed.

That head start is the code’s practical value. It is time to secure records, reconstruct substantiation while it still exists, and have the conversation about exposure before a letter forces it. None of that is available to someone who waits for the mail.

It also cuts the other way, and clients should be told so: a request is not an audit, and not every TC 424 becomes one. Cases are opened and closed on inventory without the taxpayer being contacted. Presenting the code as a certainty of examination overstates it as badly as ignoring it understates it.

Doc 6209 records that the transaction is “generated as a result of input through PCS,” the partnership control system, in one of its routes. On a return carrying flow-through interests that origin is worth identifying, because an examination reaching the client through a partnership proceeding is a different matter from one aimed at their own return — different control, different timelines, and often a different representative doing the negotiating.

The freeze it sets, and what that blocks

IRM 21.5.6.4.24 treats this code and its sibling identically for freeze purposes: "the -L (Open Examination Indicator) freeze is set when a Transaction Code (TC) 420 or TC 424 posts to an account that has been referred to Examination. It does not freeze the account."

So, as with TC 420, no money is held by this. What is affected is the adjustment path — the IRM directs account technicians to research the examination procedures before adjusting anything, and the ordinary adjustment codes are liable to unpost against an open examination indicator. A client whose routine correction has quietly failed on a year carrying a TC 424 has found the reason.

What TC 424 gets confused with

It gets confused with assignment. TC 420 carries the sentence "the return has been assigned in the Examination or Appeals Division"; this code does not. A return can sit under a TC 424 without a examiner ever picking it up, and telling a client they are under audit on the strength of this code alone is premature.

It gets confused with underreporter activity, and here Doc 6209 supplies a real link rather than a coincidence: this transaction "can also be generated for IMF when an IRP Underreported Case is referred to Exam." A TC 424 appearing after a TC 922 is very likely the document-matching case being escalated rather than an independent audit selection — and the process code on the TC 922 will say so directly, since several of its closing codes mean the case "was closed to Exam."

Its reversal also gets over-read. A reversal of this code is a bookkeeping marker meaning the request no longer stands; it is not a finding, not a clearance, and not evidence that anything was decided in the taxpayer’s favour. Where an examination genuinely closed with an assessment, the assessment posts as TC 300 and the indicator clears off that.

The practitioner’s actual next step

Treat it as a prompt to prepare, not as a conclusion — gather substantiation now, while the client can still find it.

Check whether the assignment code has also posted, because that is what separates a case in inventory from a case being worked.

Look for underreporter activity on the same module first; if it is there, the escalation path explains the referral and its process code says how far it went.

Do not attribute a held refund to this code, and do not expect it to be the reason for one.

Before submitting any adjustment for the year, confirm it will actually post, and read the module as a sequence with the IRS Transcript Decoder rather than as a list of independent codes.