What Is an IRS Substitute for Return?

Famed day walker and vampire slayer Wesley Snipes once served a three-year prison sentence for tax evasion. Poor Blade! A well-known tax protestor, Snipes was charged with six counts of willfully failing to file federal income tax returns by their filing dates, among other serious tax crimes. Most “non-filers” are not punished so severely. (By the way, isn’t protesting taxes synonymous with yelling at tornadoes or picketing rainstorms? In either case, there’s not much we can do to change those circumstances, or our responsibilities as taxpayers.)

What if i haven't filed my IRS tax return?

However, the IRS does take non-filing very seriously. In the most flagrant cases, criminal prosecution has been recommended to those individuals that willfully fail to file tax returns. For non-filers that fail to respond to IRS requests for missing tax returns, the Service can get medieval. Internal Revenue Code 6020(b) allows the IRS to prepare returns and secure tax liability assessments from non-filing taxpayers who have an open filing requirement and do not file a return as required. Basically, the Service creates a tax return from the information that they have on record. This process is called a Substitute for Return (SFR).

An SFR will often generate a tax liability much larger than that of the original tax return, if it had been filed timely by the taxpayer. In SFR cases, a delinquent taxpayer may lower his/her tax debt significantly and may even eliminate it altogether by simply preparing and submitting the missing, original tax return to the Service. For those that owe the IRS back taxes, whether business or personal, filing missing returns to gain compliance is vital.

What if i can't pay the tax owed on the return?

It is IRS policy that a taxpayer must have all necessary tax returns filed before a resolution to back tax liabilities will be considered. Remember, full compliance is a prerequisite to all Installment Agreements, Offers in Compromise, and Currently Not Collectible status resolutions.

M&M recently secured a formal IRS Installment Agreement for a North Carolina business that came to us owing approximately $70,000. In our initial research, we determined that the business had several 941 payroll tax returns that were not filed by our client. The IRS had created SFRs and assessed a massive payroll tax liability to the business. After the original 941 returns were filed by our client and processed by the IRS, the tax debt had decreased to about $6,000. Our client now pays $400 per month to satisfy the remaining tax liability.

M&M Financial specializes in resolving business tax debts stemming from delinquent payroll tax. Our Tax Resolution System is designed to locate compliance issues, such as SFRs, ensuring the best possible results for our clients. Contact us here or call us at 866-487-5624 to find out whether we can help you and how we’ll do it.