What is a Substitute for Return? – IRS Code 6020(b)

There is no question that you should always file a tax return even if you are concerned about how you will pay back taxes. The consequences of not filing a tax return are far higher than being unable to pay back taxes immediately.

In fact, under Code Sec. 6020, the IRS has the right to file a substitute tax return for an absent taxpayer who failed to file a timely return. This means the government will file for you instead. You do not want the IRS filing taxes for you because it could put you in legal trouble and you’ll likely end up paying more in taxes.

Substitute for Return

Though many have tried, it’s impossible to evade the IRS forever. Those who ignore filing a tax return are subject to IRS Code Sec. 6020. The gist of IRS Code Sec. 6020 is that the IRS has the authority to prepare and file a substitute tax return (SFR) in the event you fail to file one on time.

Under Code Sec. 6020, the IRS can prepare and sign a substitute return that determines the amount of taxes you owe. The IRS determines your income based on W2 or 1099 forms that were filed by your employer(s). 

The problem with a substitute for return is that the IRS notoriously overestimates the amount of taxes owed and fails to file a single deduction or tax credit on your behalf. Consequently, you end up getting the largest tax bill possible. There are no child tax credits, deductions for charitable donations, or deductions for investment losses..

Consequences of an SFR

You want to avoid the IRS filing a substitute for return (SFR) if at all possible. All the IRS needs to file one on your behalf is your personal information, social security number/taxpayer ID number, and sufficient information from employers that document how much you received in income for the tax year.

After the return is signed by an authorized IRS employee, it is considered official. It indicates that the IRS has legally accepted the substitute for return for the tax year and that you now owe the indicated amount on the SFR.

An SFR is treated as a valid return filed by the taxpayer to determine how much they owe in taxes, as well as associated penalties for failing to file promptly–and those penalties can rack up quickly. The IRS charges for things like “failure to file a return”, “failure to pay the tax shown on the return”, and “failure to pay estimated taxes”.

The IRS depends on an SFR to present proof to a tax court that you owe back taxes as well as tax penalties. The only thing the SFR cannot be used for is to impose accuracy-related penalties.

The SFR does not terminate the statute of limitations for failing to file a return. It is also not treated in bankruptcy proceedings as a tax return the debtor can use to obtain a discharge of tax debts.

Tax Help for an SFR

It is in your best interest to file tax returns when they are due, regardless if you can pay the taxes owed in full or not. The IRS offers installment agreements and other ways to help settle the tax debt over time if an individual can’t pay them all at once.

However, simply ignoring the IRS and failing to file a return will get you into a lot more trouble. Once you receive a notice from the IRS indicating they plan to file an SFR, you will want to take immediate action. If this happens to you, it helps to have a tax professional on your side to help manage the process.

Allowing the IRS to file a substitute for return will mean the agency will avoid claiming any tax credits, deductions, or exemptions. You will essentially be charged the highest tax bill possible.

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 return. It will allow you to claim the missing deductions and credits, as well as change your filing status (i.e. single to married filing jointly).

Notice of Deficiency CP3219N

When the IRS decides to continue with a substitute for return, they will send you a Notice of Deficiency CP3219N to the mailing address they have on file. The notice gives you 90 days to file a past-due tax return.

If the 90-day grace period has already passed, the IRS likely has already proceeded with a tax assessment (substitute for return). Once the proposed assessment is prepared, the IRS can trigger collections and other enforcement actions if the tax debt goes unpaid.

Levy & Associates – Get Tax Debt Relief

Levy & Associates has worked with taxpayers for over two decades. We have experience handling notices of deficiency and substitute for returns (SFRs).

The IRS generally reviews replacement returns far more carefully than general returns. As a result, you will want to make sure all the information on a replacement return is accurate and the correct deductions and credits are claimed.

Contact us today at 800-TAX-LEVY, or visit www.levytaxhelp.com for assistance dealing with a SFR and other tax challenges.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.

Related Tax Audit Blog Posts

Do Tax Liens Expire?

There is no question that you should always file a tax return even if you are co [...]
Read More

Will The IRS Take My Refund for Child Support?

There is no question that you should always file a tax return even if you are co [...]
Read More

What’s the Difference Between a Tax Lien and a Tax Levy?

There is no question that you should always file a tax return even if you are co [...]
Read More