Neglecting to file tax returns opens the door for the IRS to exercise a powerful action against a taxpayer. The IRS has the authority to prepare and file a Substitute for Return (SFR) on your behalf. If the IRS must file an SFR for a delinquent taxpayer, it will be prepared in the best interest of the government. Taxpayers are given only one personal exemption, zero dependents, and the standard deductions. To determine taxable wages, the IRS will draw from:

  • W-2 Forms and 1099 Reports
  • Personal Bank Deposits
  • Bureau of Labor Statistics Table

The SFR is an IRS estimate of taxes owed and is often greater than the actual tax liability. Once the IRS files the tax assessment on the SFR, they can legally begin serious collection action. It is now more important than ever to call a qualified tax attorney to help you obtain IRS tax relief.

IRS Proposed Assessments

The IRS Notice of Proposed Assessment letter informs a non-filing taxpayer of the estimated tax liability contained in the SFR. This notice states:

  • You have 30 days to respond to the IRS to avoid collection action.
  • The IRS has no record of receiving your tax return.
  • You owe the proposed tax amount with penalties and interest based on income reported.

You will be instructed to submit:

  • Your signed, past due tax return (Form 1040),
  • The signed Consent to Assessment and Collection form, or
  • A personal statement explaining why you do not need to file, etc.

At this point, it is imperative you do not act hastily out of confusion or intimidation. Prior to signing or agreeing to anything, consult with a tax attorney who can advise you of your options. You may need assistance filing past due returns to replace the SFR‘s, disputing the amount of the back tax debt, proving you are not liable for the tax debts, or qualifying for a tax debt relief program.

SFR Negative Effects

Even if you are unable to pay your taxes, it is always best to submit your return to prevent the IRS from filing a Substitute for Return. The filing of an SFR has negative effects for the taxpayer:

  • You are given one personal exemption, zero dependents and standard deductions.
  • The income reported may be incorrect.
  • You may have a much higher tax bill than necessary.
  • The Statue of Limitations does not apply to the SFR, permitting the IRS to pursue collection indefinitely.
  • An unsigned SFR, not replaced by an original return, does not qualify the tax debt for discharge in bankruptcy.
  • Tax refunds can be permanently lost.

You Need Qualified Representation

Instant Tax Solutions can file your original tax returns and represent you in IRS negotiations. We have been very successful in obtaining favorable tax debt resolutions for our clients.