SFR – Substitute For Return
The IRS uses their Substitute for Return (SFR) program to file tax returns for those taxpayers who fail to file tax returns themselves. If you have failed to file, this type of IRS Problem may soon be your problem.
If you fail to file on time, the IRS will send you a letter or call you asking you to file your return. If you ignore the request, the IRS will file Form 1040 for you. A copy of this form will be mailed to you with a request for your signature. As soon as you sign this form, the IRS can collect on your taxes. At this point, you will be responsible for the taxes assessed plus any interest or penalties that have accrued. Unfortunately for you, the IRS prepared return usually means more taxes for you than if you had filed your own return. Why is this the case?
Because the IRS does not know your specific circumstances, it does not have the right figures to fill out your tax return. It will usually file the return as if you are single or Married Filing Separate. It will not know how many dependents you have so it will not put them on the return. It will not know your expenses, if you sold stock, or if you had deductible business expenses. It will make an educated guess on how much taxes you might owe. This allows the IRS to come up with a dollar amount so it can begin collecting the taxes they say you owe. You will receive a Notice of Proposed Assessment. This assessment could become final if you do not respond to this notice. When the assessment becomes final, the IRS can start the collection process. It will have ten years to collect these taxes.
How to Resolve an SFR
Even if the figures on the SFR are correct, your best bet is to file your own tax return. Send your own return along with a copy of the SFR letter to the IRS and ask that it be accepted in place of the SFR. Resolution should occur if you send a tax return with your signature on it.
If you have received an SFR, our knowledgeable staff will be able to help you resolve this IRS Problem. Contact us today for help in preparing your own tax return to replace the SFR. Your IRS Problems will be a thing of the past in no time.