What does Code 520: Litigation or Bankruptcy Hold mean on an IRS transcript?

A legal proceeding, commonly bankruptcy, put a hold on the account. Official definition per IRS Document 6209: IRS Litigation Instituted. Freeze is released by TC 521 or 522. Some closing codes suspend the collection statute.

IRS Transcript Code 520: Litigation or Bankruptcy Hold

520

A legal proceeding, commonly bankruptcy, put a hold on the account.

The official definition, IRS Document 6209

IRS Litigation Instituted. Freeze is released by TC 521 or 522. Some closing codes suspend the collection statute.

What it means for your refund

Collection is often held while the legal matter is open. If the proceeding is your own bankruptcy, the automatic stay pauses IRS collection, and some 520 closing codes also suspend the collection statute clock, which can lengthen how long the IRS has to collect afterward.

The folklore, corrected

Myth: Code 520 means the IRS is suing me.

Document 6209 ties 520 to litigation being instituted, but the most common trigger is the taxpayer's OWN bankruptcy filing, not an IRS lawsuit. It is released by a 521 or 522, and its effect is a hold, not a judgment against you.

Worth knowing: Because some 520 closing codes pause the collection statute, the date your debt would otherwise expire can move later. When bankruptcy is involved, the bankruptcy case controls what the IRS may and may not do.

Reading the transcript around it

Codes rarely act alone: holds (570, 810) pair with releases (571, 811), a 971 often flags the letter that explains a hold, and the refund itself is always the 846 line. The full code index maps the neighbors, including the cycle code and As-of date explained without the folklore. If the account shows a balance rather than a refund, the letters that follow are decoded in our IRS notice decoder.

Sources: IRS Document 6209, Section 8A; IRM 21.5.6; IRS refund myth page. Verified July 2026.

General educational information, not tax advice. A transcript entry only means something in the context of your account; a credentialed tax professional can read yours in full. ClearChoiceRadar is not affiliated with the IRS or any government agency.