What is a Substitute for Return?

There are typically two kinds of people in this world: people who can’t wait to file their tax returns and those who’d like to avoid tax season altogether. Generally, it’s the people who are expecting a nice refund check who rush their income tax returns to the IRS as soon as they receive their W2s. Everyone else hears “taxes” and envisions piles of boring and complicated paperwork, as well as the sizable check they’ll have to write to the IRS. As tempting as it may be to avoid filing, it’s usually a mistake that individuals ultimately regret when they learn the IRS has filed a Substitute for Return.

What is an SFR?

A Substitute for Return, or SFR, is created by an automated IRS system when an income tax return has not been received from a taxpayer. The system examines information submitted by third parties (like W2s and 1099s from employers or forms from financial establishments) to fill out a return for a taxpayer.

Will I Owe More With a Substitute for Return?

When filling out the return, the system does not take into account the deductions, exemptions, or even the filing status that the individual would have selected. Instead, every SFR is prepared with the standard deduction and one exemption. Each one is filed as single or married filing separately, depending on the taxpayer’s marital status.

This means that the taxpayer will owe the most amount of money possible. This may be a huge difference from what would have been on an income tax return prepared by an individual, especially if that person usually files as Head of Household and has three dependents. In fact, some people who might have received a refund can wind up with a tax debt after a Substitute for Return is filed.

Can You Amend a Substitute for Return?

If an individual receives an SFR, they may be able to amend what’s been filed by the IRS. If someone files an income tax return within 90 days of the IRS Notice of Deficiency CP3219N (which notifies a person that they have filed a Substitute for Return and are proposing a tax assessment), the proposed IRS assessment will not go on permanent file. If it has been longer than 90 days or the Substitute for Return’s assessment is already on file, they can still replace it with an income tax return. The return, however, must be filed within 3 years of its original due date if a refund is due.

Those who have several years of Substitute for Returns, or have lapsed on filing for even one year, should contact a licensed tax professional for assistance. At Tax Assistance Group, we will work hard to ensure that any income tax returns that need to be filed are prepared accurately and IRS collection actions are prevented, if possible. To learn more, schedule a free consultation today!