Should I Not File My Tax Return If I Cannot Pay The Balance Due?

Unfiled Returns

The answer to this question is a resounding NO! Even if you owe back taxes when tax return filing is due, it is imperative to file the tax return anyway. Not filing a tax return will evoke far higher consequences than what occurs from being unable to pay the taxes current taxes owed because one becomes subject to a non-filing penalty of up to 25% of the tax due. This penalty is applied in monthly increments at 5% of the tax due to the penalty accruing up to 25%.

It doesn’t just end there. In fact, under Code Sec. 6020, the IRS has the right to prepare a Substitute For Return (“SFR”) filing in place of the taxpayer not filing a timely return. This means the IRS will file for the taxpayer instead. On the surface, that may not seem too bad since the IRS would save you the time it takes to prepare your return and, in many cases, the costs of hiring a tax professional. This is not ideal because it will likely result in a much higher tax bill and trigger other IRS collection actions.

Ramifications of an SFR

The problem with an SFR is that the IRS will not take a single allowable deduction or credit on your behalf, resulting in your getting the most extensive tax bill possible. For example, the IRS will not apply child tax credits, charitable donation deductions, or deductions for investment losses. In addition, if you have some reported 1099 income, you will not have any expense deductions from your business activities.

In addition, having the IRS file an SFR should be avoided since the SFR is treated as a valid return for determining how much a taxpayer owes, as well as associated penalties IRS charges for things like “failure to file a return,” “failure to pay estimated taxes,” and “failure to pay the tax shown on the return.”

Also, in some cases, the tax debt can be dischargeable in bankruptcy, whereas that is not the case for taxes owed from an SFR filing. And the statute of limitations for failing to file a return is not terminated.

Tax Relief Help for an SFR

It is in your best interest to file tax returns when they are due, regardless of whether you can pay the taxes owed in full. For those that cannot pay the balance owed at once, the IRS offers other ways to help settle a tax debt over time, such as installment agreements.

The IRS will notify you that they plan to file an SFR on your behalf. If this happens, you will want to take immediate action and have your return prepared. Seeking help from a tax professional would be beneficial for managing the process and getting it resolved.

The good news is that you can still file a late tax return even after the IRS has imposed an SFR. It is still possible to file a return that will eventually replace the substitute for the return. It will allow you to claim the missing deductions and credits and change your filing status.

If the IRS decides to proceed with an SFR, they will send you a Notice of Deficiency CP3219N to the mailing address they have on file. You will have 90 days from the date of notice to file a past-due tax return. The IRS will begin their tax assessment if you don’t prepare a new return within this time frame. The assessment starts the collection process with the IRS, which could lead to liens, levies, and garnishments.

Harmon Tax Resolution, LLC – Get the IRS Tax Debt Relief You Deserve!

We have experience handling notices of deficiency and substitute for returns (SFRs). It is essential to ensure your replacement return is thoroughly and correctly done since the IRS reviews it far more carefully than general tax returns. At Harmon Tax Resolution, your return and related IRS tax issues will receive proper attention from a comprehensive 3-1 seasoned tax professional Tax Attorney – Seasoned CPA, and IRS Enrolled Agent ensuring adequate representation.

Contact Harmon Tax Resolution, LLC today at 772-418-0949, or visit for assistance dealing with an SFR and other IRS tax-related issues.

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