What is a Substitute for Return?

The "Substitute for Return" (SFR) program launched by the IRS is aimed at taxpayers who have not filed their tax returns for a certain period. The IRS prepares a Substitute for Return, which is considered a legal document. With this, the IRS has the authority to impose a tax lien such as bank levies and wage garnishments.

If you fail to file your tax returns on time the IRS has the authority to send you a letter. They may even contact you on the phone, say tax lawyers. If you fail to respond then the IRS gathers all the information from third parties and issues a Form 1040 to you. If you happen to receive one, you will find that the taxable amount is usually higher than what you normally file.

The Substitute for Return is usually higher than your normal tax return due to several reasons.

• Deductions you should receive are not taken into account.
• The IRS will use a standard deduction.
• The IRS uses the “single” or “married filing separately” classification which attracts the highest tax rates.
• If you have received 1099s the IRS will levy tax on the total amount of 1099s since they cannot take your expenses into account.
• Any stock you sold will be taxed on 100% of the sales price.
• The IRS will apply the minimum exemptions permitted.

To determine the taxable amount in an SFR, the IRS will use:

• W-2 Forms and 1099 Reports
• Personal Bank Deposits
• Bureau of Labor Statistics Table

As a business owner, if you fail to file 941(payroll tax returns) and 940 (unemployment tax returns) the IRS has the right under IRC section 6020(b) to file payroll returns. This figure will also be greater than what you owed, caution tax attorneys.

The IRS has a shaky past but we do not. We have been honest from the beginning and we built a website that connotes this. If you need tax legal help, it is just around the virtual corner. Use this site and make it happen! It is....Tax.USAttorneys.

Remedial action for SFRs

If you do not agree with the SFR, you have the right to file an original return and prove that your tax liability is less than the figure they have arrived at. The procedure is known as an Audit Reconsideration and can be used when you disagree with the Substitute of Return. This process will enable you to allow the IRS to reconsider your tax returns.

The IRS can begin the collection process once they file an SFR. It is therefore judicious to hire the services of a tax lawyer to help you lower the tax imposed on you. Americans have never been taxed this much. The private sector has been under assault by this government for years now. And even with all these taxes, America is still falling more into debt.

The IRS will issue a Notice of Proposed Assessment informing you of your estimated tax liability. You will have 30 days to respond to the notice, failing which the IRS will initiate the collection process. The salient features of a Notice of Proposed Assessment are:

• The IRS will state the fact that they have not received your tax return.
• The amount of tax with penalties and interested based on your income.

You will need to submit the following documents to the IRS.

• Form 1040 duly signed
• Consent to Assessment and Collection form duly signed, or
• A personal letter explaining the reason why you did not file your returns (I chose to watch 24, every standout season, for the 3^rd time does not suffice.

The bottom line is to let a tax lawyer handle the Substitute for Return or SFR. In most cases, you will find yourself with a taxable amount which is much lower than what the IRS presented to you. We all know how greedy they are but they are not all unethical like Lois Lerner was.