Did You Know the IRS Can File a Return on Your Behalf?

What is a Substitute for Return?

A Substitute for Return is a return the IRS prepares for you when a year goes unfiled. It uses the income other people reported about you and nothing else — no deductions, no credits, no business expenses — and the least favorable filing status available.

The IRS receives copies of your W-2s, 1099s, 1099-Ks and broker statements whether or not you file. When a year goes unfiled long enough, it can assemble a return from those documents alone — the IRS sets out what filing late involves, and what happens when you do not, at Filing past due tax returns, IRS.gov.

• ·Income, in full. Every dollar reported to the IRS by anyone.
• ·Expenses, none. A contractor with $90,000 in 1099 income and $40,000 in genuine costs is assessed on $90,000.
• ·The worst filing status. Usually single, and usually without dependents you were entitled to claim.
• ·Then penalties and interest on the inflated figure, running from the original due date.

Can a Substitute for Return be replaced?

Yes. You can file your own return for that year, with the deductions and credits the IRS left out, and it supersedes the IRS version. In practice this is the single largest lever on the balance — it often falls substantially, and sometimes it disappears.

A Substitute for Return can be replaced by your own return for that year, with the deductions and credits the IRS omitted. In practice this is the single largest lever on the balance — very often it falls substantially, and sometimes it disappears.

You do not need every receipt to do it. Bank records, card statements, mileage logs and payer records reconstruct most of what is needed.

What should I do if the IRS filed a return for me?

Pull your transcripts first, then file accurate returns for the years that need it. Do not negotiate the balance before the returns are corrected — the number you would be negotiating is not the number you actually owe.

1. Get your transcripts before assuming anything. They show which years were filed, which were substituted, and what was reported.
2. Work out which years actually need filing. Enforcement is normally pursued for a six-year period, so it is usually fewer than feared — back taxes and unfiled returns covers the policy.
3. File accurately, with the expenses. That is what replaces the IRS's version — legitimate business costs belong on the return no matter how late it is (Deducting business expenses, IRS.gov).
4. Then deal with what is genuinely left — penalty relief, a payment plan, or a settlement.