What Does the Reference Number 1242 Mean From the IRS? (2024)

Every year the IRS delays issuing tax refunds to a certain percentage of taxpayers for various reasons. Some of the most common reasons why tax return processing is delayed are fraud, incorrectly calculated taxable income amounts, or identity theft.

The IRS reference number 1242 indicates that your tax return was flagged for review because it raised fraud or identity theft concerns.

Although this might sound alarming, seeing this reference number isn’t a reason for concern because the IRS system often flags tax returns for review randomly. Hence, you just have to confirm the information you included in your tax return to resume its processing.

Let’s look at the reasons why the IRS reference number 1242 might show up on your tax account and what you can do to resolve the issue quickly.

Table of Contents

The Meaning of the Reference Number 1242

After you e-file a return, the IRS will need a few weeks to add it to the Individual Master File system. This system screens all tax returns and compares them to specific pre-set parameters calibrated to detect inconsistencies and fraudulent activities.

As a result, your tax return might be flagged for review if you claimed an unusual amount of tax credit and countless other reasons. The primary purpose of IRS reference number 1242 is to inform taxpayers that their tax return processing will be frozen until the issue is resolved.

The IRS system mainly uses the random sampling method when flagging and selecting tax returns for review. Hence, the reference number 1242 doesn’t indicate whether a taxpayer has filed a return incorrectly or was being dishonest.

Computer screening and comparing the information from Form W2 and Form 1099 are also among the methods the IRS uses to select tax returns for further review.

Finding the Reference Number 1242

The IRS Where’s My Refund tool enables taxpayers to monitor the status of their tax returns. The tool’s Refund Status section will show the reference number 1242 if the IRS flags your tax return for an additional review.

In most cases, the section’s top segment will show ‘We have received your tax return, and it is being reviewed’ message, followed by the Tax Topic 152, Your Appeal Rights link.

You’ll find the IRS reference number at the bottom of this section within the following message:

‘Please mention reference number 1242 to the IRS customer service.’

This message doesn’t mean you must reach out to the IRS. In fact, you must wait until you receive the CP05 Notice before attempting to fix the problem.

Receiving CP05 Notice

The IRS will send you the CP05 Notice shortly after freezing the processing of your tax return. This Notice usually informs taxpayers that their tax return is under review and doesn’t require any specific action from them.

However, the IRS can use this Notice to request specific taxpayer documents.

What Does the Reference Number 1242 Mean From the IRS? (1)

The document has the ‘What you need to do’ section that outlines the actions you can take and sets the deadline by which the tax return review should be completed. The IRS usually needs sixty days to review a tax return and unfreeze its processing.

Resolving the IRS Reference Number 1242 Issues

If the CP05 Notice you received contained a request for additional information, you should start gathering the documents the IRS requested as soon as possible.

Don’t send the original documents. Instead, make two copies of each document you need to send to the IRS. Keep one and send the other to the IRS via mail. Find the routing number on the CP05 Notice and use it to ensure your documents are delivered to the correct department.

Ideally, you’ll send the requested documents to the IRS within a month to avoid delaying the processing of your tax return for longer than necessary.

If you must go to the nearest IRS office to confirm your identity, you should do so a few days after you get the CP05 Notice.

The IRS urges taxpayers to wait 45 days from the moment they receive a CP05 notice before asking for an update on their tax return’s processing status.

Notice CP05 contains instructions on what to do if you have additional questions. Additionally, you can contact the Taxpayer Advocate Service (TAC) if you can’t resolve the reference number 1242 issue with the IRS on your own.

Optionally, you can get in touch with the Low Income Taxpayer Clinic (LITC), which can assist you in finding a solution for your problem free of charge.

How to Avoid Seeing the Reference Number 1242 on Your Next Tax Return?

The fact that most tax returns the IRS system flags for a return are selected randomly suggests there’s nothing you can do to avoid seeing the reference number 1242 in the future.

Using tax software to prepare and e-file your taxes will minimize the margin of error and reduce the chances of your tax return getting flagged for review due to incorrect information.

Hence, double-checking the information you include on a tax return and ensuring it matches the information the IRS got from your employer on Form W2 or Form 1099 is the only way to avoid having your tax return frozen.

Frequently Asked Questions

How Long Does the IRS Need to Complete a Tax Return Review from the Moment Reference Number 1242 Shows Up On My Account?

The IRS will need between 60 and 120 to complete the review of your tax return from the moment it freezes its processing and adds reference number 1242 to your account.

Does Reference Number 1242 Mean My Tax Return Will Be Audited?

The reference number 1242 doesn’t mean the IRS will audit your tax return by default. This reference number only indicates that the IRS plans to conduct an additional review of your tax return. However, you might be facing an audit if the review reveals one or more audit triggers.

Do I Have to Contact the IRS if the Reference Number 1242 Pops Up On My Account?

You don’t have to call the IRS as soon as you see the reference number 1242 in the Refund Status section of the Where’s My Refund app. Instead, you should follow the instructions regarding further steps from the CP05 Notice.

Should I Appeal the Reference Number 1242?

Although taxpayers have this option, appealing the reference number 1242 is often unnecessary because it simply indicates that the IRS must validate certain tax return information.

A tax professional can help you prepare a tax return and ensure that all information you submit to the IRS is accurate.

Visit choicetaxrelief.com or call 866-800-TAX to schedule a free consultation with a CPA who can help you complete a tax return or interpret Notice CP05 correctly.

What Does the Reference Number 1242 Mean From the IRS? (2024)

FAQs

What Does the Reference Number 1242 Mean From the IRS? ›

What is IRS Reference Number 1242? IRS Reference Number 1242 is a code the IRS uses to notify you that your return has been selected for review. Your return will remain frozen in the IRS's system until the review process is complete.

What does tax topic 151 and reference 1242 mean in TurboTax? ›

Author has 106 answers and 61.7K answer views. · 10mo. Originally Answered: What does it mean when you get a tax topic 151 from the IRS and a reference number 1242? Tax topic 151 usually means there is an offset. However, reference number 1242 is a dependency exemption issue.

How long can your taxes be under review? ›

Wrapping up. Understanding why the IRS refunds can be delayed is key to managing your taxes effectively. Delays can be due to issues like return errors, unpaid taxes, or old debts. Typically, simple returns take under 3 weeks, while complex ones might take 60-90 days.

Does tax topic 151 mean I'm getting my refund? ›

You received a Tax Topic 151 notice from the IRS because they're reviewing your tax return and have identified potential issues or outstanding debts, such as unpaid taxes, child support payments, federal student loans, etc. The IRS is notifying you as a courtesy to inform you that your tax refund may be affected.

What does it mean we have received your tax return and it is being reviewed? ›

Why is my return being reviewed? While we accept most tax returns as filed, we select some for examination. The IRS examines some federal tax returns to determine if income, expenses, and credits are reported accurately.

What is the 1242 refund status? ›

What is IRS Reference Number 1242? IRS Reference Number 1242 is a code the IRS uses to notify you that your return has been selected for review.

What is the meaning of 1242? ›

The 1242 angel number is a powerful and meaningful message from the spiritual realm urging you to trust your intuition. This number sequence signifies that you are on the right path and that your thoughts, feelings, and instincts are aligned with your life's purpose.

What is the message code 151? ›

Denial code 151 is used when the payer determines that the information provided does not justify the number or frequency of services billed. In other words, the payer believes that the documentation or evidence submitted does not support the need for the amount or frequency of services claimed for reimbursem*nt.

What is the tax topic 151 for 2024? ›

Tax Topic 151 means your tax return is now under review by the IRS. The agency either needs to verify certain credits or dependents, or it has determined that your tax refund will be reduced to pay money that it believes you owe.

How long does it take the IRS to review an audit? ›

How long does an IRS audit take to complete? Now for the answer to the all too familiar question every tax attorney gets: “How long does a tax audit take?” The IRS audit period itself should generally take no more than five to six months. Sometimes with proper preparation, they can be resolved faster.

How do I know if my tax return is flagged for review? ›

If the IRS decides that your return merits a second glance, you'll be issued a CP05 Notice. This notice lets you know that your return is being reviewed to verify any or all of the following: Your income. Your tax withholding.

Why is the IRS holding my refund for 120 days? ›

The IRS may also hold your tax return (and refund) because of made-up wages or withholding, or fake Forms W-2. These tax returns will be reviewed by an IRS employee; in this case, your tax return could be sitting in a queue for a while.

Should I be worried if my refund is still being processed? ›

If you're still waiting on your tax refund, it's possible that your tax return is taking longer for the IRS to process because it requires additional review. There are several reasons why your tax return may be delayed: Errors such as an incomplete filing status.

What does it mean to claim a dependency exemption? ›

A dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption. Each dependency exemption decreases income subject to tax by the exemption amount.

Is it better to file exempt or claim dependents? ›

A dependency exemption is an amount of money you can deduct from your adjusted gross income for tax purposes. Exemptions are highly desirable, as they reduce taxable income, thereby resulting in less income tax. The actual amount that can be deducted varies from year to year.

What is federal tax code 151? ›

§151, Personal Exemption

The exemption amount is adjusted annually for inflation (IRC § 151). A taxpayer whose adjusted gross income (AGI) exceeds an applicable threshold amount based on filing status must reduce the amount of his or her otherwise allowable deduction.

Is tax topic 152 something to worry about? ›

You do not need immediate action if you see Tax Topic 152 on your refund status. It indicates that your return is being processed.

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