The IRS May Prepare a Substitute for Return in Place of an Unfiled Tax Return

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What Is an IRS Substitute for Return?

A Substitute for Return (SFR) is a tax return that the IRS will prepare on behalf of the non-filing taxpayer, usually about two years after the original tax return would have been due. This tax return is generally prepared in an automated fashion. When taxpayers fail to respond by filing a return, the IRS can file an SFR that creates a tax assessment based on prior-year information and information obtained from third parties. These returns can cause significant harm to self-employed tax filers. Most of the deductions and exemptions a taxpayer may be entitled to claim can be obtained only if the taxpayer files the return, meaning the IRS will not do this when preparing an SFR. Thus, the SFR assessments may overstate the proper amount of unpaid tax.

SFRs can be a massive problem for the taxpayer because unfiled returns can potentially lead to the following problems:

  • This could lead to criminal prosecution for tax evasion.

  • Increases extensions for your IRS statutes of limitations (by law, the IRS gets only ten years to collect its tax debts, so if you fail to file returns, you are only giving the IRS a significant advantage).

  • SRSs can prevent you from being eligible to wipe out those income taxes through bankruptcy.

  • Interest and Penalties accrue back when the original return and taxes were due.

For additional information, see the following blog posts:

How Does the IRS Use a Substitute for Return?

An SFR is a tool the IRS uses to initiate its collection apparatus because it establishes an assessment of your taxes. Collection activities could include tax liens, levies, wage garnishments, foreclosure activities, and passport revocation.

If you are or will be dealing with any of these IRS collection activities, call Harmon Tax Resolution, LLC today for a free consultation with experienced tax attorney-CPA-IRS EA Will Harmon on how he protects your rights and helps put this behind you.

What happens when the IRS performs an SFR on an unfiled tax year?  How Do I respond to an SFR?

Once the IRS prepares an SFR, they will send out an assessment letter with an SFR, giving you 30 days to take one of the following actions:

  • Complete your own tax return, sign it, and send it in.

  • Affirm the IRS’s position by sending a signed and dated Consent to Assessment and Collection form.

  • Prepare a statement explaining why you are not required to prepare a return and send it in.

Your responses are limited to 30 days from the date on the assessment letter. If you don’t respond, the IRS sends a second letter by certified mail (Statutory Notice of Deficiency, also known as a 90-Day Letter). This notice indicates that the proposed tax assessment stands, and the balance will be subject to IRS collection procedures, including attachment of penalties and interest towards the balance owed.

It’s imperative to understand the provisions within the letter thoroughly. These provisions give you the right to dispute the assessment in Tax Court. You will have 90 days from the letter date to perform one of the following actions:

  • Prepare and File an original tax return to replace SFR.

  • Agree to IRS Assessment and Collection by filing a consent response.

  • Prepare a statement explaining why you are not required to prepare a return and send it in.

How Far Back Will the IRS Go Back to Prepare Substitute For Returns?

The IRS can go back as far as they want to; however, they generally only go back for six years on unfiled returns. If the IRS believes there has been some real abhorrent or fraudulent behavior beyond six years, they may see fit to extend beyond six years.

How Far Back Can You Claim Tax Refunds?


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There is a period of limitation on filing a claim for a tax refund. The claim must be filed within three years from the original tax return deadline or two years from when the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within two years from the time the tax was paid.

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You have come to the right place! In addition to resolving your IRS issues, we provide complete tax preparation services. A Tax Attorney-Enrolled Agent-CPA will prepare your current and prior tax returns. The IRS considers the Enrolled Agent the gold standard for tax preparers. Why settle for less? We want to ensure that our clients resolve their current IRS issues most efficiently and cost-effectively. Our valued clients avoid delays and higher costs when an attorney must go elsewhere to obtain comparable high-quality tax preparation services to resolve the IRS issue.

 Let us help you find a solution to your tax problem. Call Harmon Tax Resolution, LLC today at 772-418-0949 or complete our online form to request a free consultation with a knowledgeable multi-licensed tax attorney-CPA-Enrolled Agent.

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Harmon Tax Resolution, LLC services the entire state of Florida.

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