Substitute Tax Returns

It could happen to anyone. It could be a family emergency, the loss of a loved one, or unexpected health complications, but before you know it April 15 has come and gone. You don’t file your missing tax return. The next year comes and goes with the same result and before you know it you are looking at several years of unfiled tax returns. What do you do? What are the repercussions? What are your options?

As a U.S. citizen you are required to file your tax return and pay your taxes on time by any established deadlines. Failure to do so can result in the IRS preparing what they call a “Substitute for Return (SFR).” The IRS will take the information they have on file for you from Wage and Income Transcripts and prepare a “substitute” return using the bare minimum of deductions allowed.

The IRS has a lengthy process that affords you many opportunities to prevent this scenario from occurring, but when it happens the resulting balance can come with some sticker shock.

Many people who require the services of a tax representative usually have multiple substitute returns or are missing multiple returns. All reputable tax representation companies will review these substitute returns and if necessary recommend replacing them.  If you know that the IRS has filed substitute returns for you it is important to understand that it may be necessary to file original tax returns for these years and come into tax compliance before further options with the IRS can be considered.

You don’t want to replace a substitute return if it is unnecessary. In some cases filing over these substitute returns can result in making your tax controversy worse. You should always hire an experienced representative to review your unique situation for you before filing and replacing any substitute returns.