Bob Jablonsky & Associates Blog

The Substitute for Return – When You Owe the IRS but Didn’t file a Tax Return!

by | Aug 26, 2022

Did you know that if you don’t file a tax return, the IRS can file one on your behalf? Well, they can. I have taxpayers come in who may not have filed taxes in years but now have the IRS attempting to collect from them.  It can happen and I’ll explain when and how that happens.

Watch my You Tube video to learn even more on this topic – https://youtu.be/W-L3Irb0zVM

So, How Does This Happen?

In the US, tax compliance is voluntary. We file our own tax returns each year. But if we don’t, Section 6020(b) of the Internal Revenue Code authorizes the IRS to file a return on our behalf. It is called a Substitute for Return or SFR. Once the SFR is completed and the tax is assessed, the IRS to begin collections. 

This does not happen overnight. First, the IRS will make the taxpayer aware they have not filed a return. Next, they will send several notices to the taxpayer proposing a change to their tax liability. If the taxpayer still does not respond, the IRS may file a Notice of Deficiency, which gives the taxpayer to go to Tax Court to plead their case (often they will end up in Appeals if they respond). If the taxpayer still does not respond, the tax will be assessed and the IRS will begin collections.

The Bad News

If the IRS files an SFR on behalf of the taxpayer, it will most likely not be to the taxpayer’s benefit.  The IRS will create the return using information it has received from employers, banks, and other payers.  Generally, when filing an SFR, the IRS will complete returns as follows:

  • An SFR is filed with a filing status of either single or Married Filing Separately. They will not file Married Filing Jointly or Head of Household status.
  • The IRS will use the standard deduction for the filing status even if the taxpayer qualifies to itemize.
  • There will be no credits.
  • If the taxpayer has business income, the IRS will not report any business expenses.

What can the Taxpayer do once the SFR is filed?

There are several actions that the taxpayer can take to correct any incorrect SFR’s. Here are two common ones. One, is that they can file a correct return. A second is to request Audit Reconsideration. If the taxpayer does not address the issue, the IRS will continue to pursue collections and may take additional actions such as levies or liens.

Want to learn more on SFRs?  Watch my You Tube video – https://youtu.be/W-L3Irb0zVM

Do You Need Help?

If you need help with a late tax return filing, and SFR filing, or any IRS tax issue, I’d be happy to talk with you.  Please give me a call at (972) 821-1991 or set up 15 minutes on my calendar at https://jablonskyandassociates.com/contact/

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

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