|Substitute For Return (SFR)|
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(Service Filed Return)Quick action by taxpayer is necessary to avoid letting the problem spin out of control...
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Often, delinquent filers and non-filers will find that their tax returns have been filed for them automatically by the Internal Revenue Service. These are called a "Substitute For Return" (SFR) or as they are sometimes called "Service Filed Returns." A taxpayer would have been given official notice of this action, mailed to the last known address. These SFR returns often lack the information a taxpayer would have included on a filed return. The tax calculation on a SFR return is usually the highest it could be, plus penalties and interest. The amount due on these returns usually cannot be satisfied through bankruptcy. Even if the tax has been paid by the taxpayer or through offsets and levies, a return must be filed. If the tax is adjusted and a refund is due, the three year forfeiture rule for refunds will apply.
It is important to prepare and file your own, accurate, version of the tax return ASAP with all of the tax deductions and tax credits that you are legitimately entitled to, but which the SFR program does not allow until your own paperwork is submitted. You should avoid unnecessary contact with the IRS during this period, but should pull together your documentation so a package can be prepared by yourself with your tax advisor-advocate and submitted to IRS before the situation accelerates and spins out of control.
Most States have a similar process, often called Notice of Proposed Assessments (NPA). While the title of the document may change, the effect is the same as with the Internal Revenue Service. There are taxes, penalties and interest due. The State of California has two additional charges; a demand penalty and a collection fee. Most states as well as the IRS will abate (forgive) some of the penalties for reasonable cause ( a good reason).
SFR's are created under the ASFR system:
Automated Substitute for Return (ASFR) Program Overview
Last updated: January 20, 2014January 2014
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