Have you received a notice in the mail stating that the IRS has prepared a tax return on your behalf? This is known as a Substitute for Return (SFR), and while it might seem like the IRS did your "homework" for you, it is rarely good news for your bank account.
When you fail to file a tax return, the IRS eventually loses patience. Using the information reported to them by your employers (W-2s) and banks (1099s), they use their authority under Section 6020(b) of the Internal Revenue Code to calculate your tax liability.
The IRS is not looking for ways to save you money. When they file an SFR, they typically:
The result? An IRS-calculated tax bill that is often two to three times higher than what you actually owe.
No. One of the most important things to know is that an SFR is not set in stone. You still have the right to file your own original return to replace the IRS’s version.
By filing an accurate return, you can:
If you don’t challenge an SFR, the IRS will move forward with Assessment and Collection. This is the stage where "letters in the mail" turn into:
Correcting an SFR is more complex than a standard filing. It requires matching IRS records exactly while aggressively finding every deduction you missed.
At Wolf Tax, we pull your official IRS transcripts to see exactly what they have on file. We then prepare an original return that "replaces" the SFR, often wiping out thousands of dollars in unnecessary debt in the process.
Don't let the IRS do your math for you.
If you need to cite the IRS's internal operating procedures (which is often helpful when negotiating with a Revenue Officer), the relevant section is:
A frequently cited case regarding the validity and limitations of SFRs is Cabirac v. Commissioner, 120 T.C. 163 (2003). In this case, the Tax Court clarified that for an SFR to be valid under § 6020(b), it must be "subscribed" (signed) by an authorized IRS official and contain sufficient data to calculate the tax liability.