IRS Substitute for Return: Explanation & Next Steps

By Todd Whalen- December 1, 2022

Did you know that the IRS has the authority to file a tax return on your behalf if you fail to do so on your own? It’s called a Substitute for Return (SFR), and it could be a problem for anyone that doesn’t have a strong track record of filing their returns on time. Advanced Tax Solutions as experience dealing with SFR situations, and we can help you understand exactly what tax relief services you may need in your specific situation.

What is a Substitute for Return?

If you neglect to file a tax return for a specific year and the IRS has third-party information like a W-2 or 1099 for your earnings in that year, they can file an SFR on your behalf to calculate the amount of taxes you owe for that year.
When the IRS files an SFR on behalf of a late taxpayer, they use married filing separately, or single filing status and the standard deduction, which means that the average SFR could show significantly more taxes owed than a properly filed return would have calculated.

When Can the IRS File This on Your Behalf?

The IRS can file an SFR on behalf of any taxpayer once the tax return that should have been filed is more than 12 months late. Once the tax return reaches this point and the SFR is filed, the IRS will also add penalties and interest and begin the collection process.

IRS Process

The SFR process always starts with a simple notice from the IRS that they have information about your tax filing obligations but do not have a return. This is a friendly request. If you fail to respond to the initial request, the IRS can file an SFR once the return passes 12 months unfiled. From that point, the taxpayer will have 30 days to either file a correct return, call the IRS and explain why they aren’t filing a return, or agree to pay the amount owed.
Failure to respond to an SFR writhing the 30-day window will lead to a “Notice of Deficiency” after 90 days. This notice will come through certified mail and use much stronger language. If the taxpayer still doesn’t respond, the IRS can move forward with tax liens, levies, and wage garnishments until the debt is settled.

Next Steps When This Happens to You

If you receive a notice from the IRS about an SFR, your best bet is usually to file a tax return for the year in question. This will be your best chance to settle the taxes for the lowest amount possible but there are other options so consulting with a tax professional is a good idea. Searching the web for “back taxes help near me” is a good place to start, but an even better approach is to simply contact us, and take the first step towards a solution. Your initial consultation will always be free with a licensed professional who is also a Certified Tax Resolution Specialist. SFR notices and dealing with the IRS can be intimidating, but it doesn’t have to be. Our experienced team at Advanced Tax Solutions has over fifty years of combined experience providing tax relief and strives to be your resource, partner, and advocate, no matter your situation.
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