__________ Substitute For Return (SFR)
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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).

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SFR's are created under the ASFR system:

Automated Substitute for Return (ASFR) Program Overview

  1. In the WI Operating Division, Compliance Services Collection Operation (CSCO) administers the ASFR program. In the SBSE Operating Division, ASFR is a separate Operation. The ASFR Program is worked in two WI Compliance Campuses, Austin and Fresno and in one SBSE Campus, the Brookhaven Campus. The ASFR functions prepare Substitute for Returns under the authority of Internal Revenue Code (IRC) Section 6020(b) and issue Statutory Notices of Deficiency as authorized by IRC Section 6212.

  2. ASFR is a non-filer or return delinquency program. Workplan closures include only modules where the TDI has been closed. Workplan closures include both systemic and non-systemic closures. Transfers or reassignment of an unresolved TDIs are not workplan closures. Workplan closures are reported on the ASFR 200 MIS Report. See IRM

ASFR Overview

  1. The Automated Substitute for Return (ASFR) system is a separate system which processes weekly and resides on a Sun Platform at the Enterprise Computing Center (ECC). The Collection Assignment Code (Tsign) for ASFR accounts is 8000. Unresolved TDIs are directly assigned to 8000 and uploaded to the ASFR database when the MF status of the TDI moves to Status 03, the selection code is an ASFR selection code, ASFR criteria is met and/or the account is already assigned to 8000. Modules may also be transferred from other functions, specifically CFf and ACS, to ASFR if they meet ASFR criteria as defined in See IRM

ASFR Criteria

  1. A module meets ASFR criteria if all the following conditions exist:

    • It is not older than five years prior to the current processing year and ,

    • It has IRP with a proposed tax liability of ≡ ≡ ≡ ≡ ≡ or more and,

    • IRP exists on MF Supol for the module and,

    • It has no associated TDAs (Balance Due modules in Status 22, 24, 26), and ,

    • The total IRP documents for the module are 60 or less and,

    • There are no -V, -W, -L, -Z or , Z- freezes on the module or account, and

    • The select code is not a CI, or IRS employee selection code.

Statute of limitations under IRS Code §6501(a) does not begin until taxpayer files his own tax return.
IRS Code §6501(b)(3) Return Executed By Secretary
The execution of a return by the Secretary pursuant to the authority conferred by such section shall not start the running of the period of limitations on assessment and collection.




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