An IRS Substitute For Return (SFR) occurs when a taxpayer does not file a federal tax return. If no tax return is filed then the IRS will eventually prepare an IRS Substitute Tax Return using wage and other income information reported to the IRS for that particular tax year by other individuals or businesses. The IRS cannot do this without waiting the legally required period of time and trying to contact that taxpayer first, usually for at least three years. The actual IRS Substitute Tax Return (SFR) is designed to calculate the maximum tax liability possible.
Therefore, the IRS will not take into consideration such things as marital status, dependents, business or itemized deductions, or credits that could otherwise lower the individual’s IRS tax debt. As a result, the total tax debt owed could be substantially higher based on the IRS Substitute Tax Return than if an actual income tax return had been filed.
IRS Substitute For Return – A Real Life Story
Many taxpayers find themselves in tax trouble because an IRS Substitute For Return was filed against them without their knowledge. A client of National Internet Tax Services (NITS) IRS Substitute Tax Return cases involved a client we helped by the name of Alexander (Alex for short).
Alex was married and had four young kids but he hadn’t filed any income tax returns for the previous eight years. Unfortunately for him, the IRS found out about it and filed an IRS Substitute Tax Return for each of the seven years he hadn’t filed his own tax returns. Once Alex received IRS notices in the mail, he contacted our office. He was rather confused by the IRS collection action being taken against him. Alex didn’t understand what had taken place. Unfortunately, he thought that he didn’t owe any taxes because he had never filed any tax returns. But like most people he just didn’t know about the IRS Substitute Return policy.
There is an IRS tax policy of filing an IRS Substitute For Return for people who don’t file their own income tax returns. Since Alex had been working as a private contractor, the IRS computer system automatically took Alex’s 1099 income and calculated income tax and self-employment tax on him. Each IRS Substitute Return was filed as Married Filing Separate with no dependents, no business expenses and no business or itemized deductions of any kind. The IRS Substitute Return filing system is programmed to automatically generate the maximum amount of tax liability possible. This policy is why the IRS doesn’t grant any deductions or credits on an IRS Substitute Return. In addition, the IRS added penalties and interest to his already astronomical tax debt.
An IRS Substitute Return had been filed against Alex for each of the seven years he did not file his own tax return. His total amount of tax had suddenly become over $85,000. In addition, the IRS had filed IRS Wage Garnishments at several of the companies that had filed 1099s on him during the last seven years. Since Alex still did quite a bit of work for three of those companies, he suddenly found himself with very little income. After reviewing his case, we determined that not only could we get his tax debt lowered, but we could obtain IRS Wage Levy Releases for him as well.
After Alex had filled out our Client Information Package and paid our initial fees, we got to work on his case. Three days later, the seven tax returns that we had prepared and filed for him replaced every IRS Substitute Return and we had reduced his total tax debt to less than $17,000 (including penalties and interest). Not only did we do that, but we got all of his IRS Wage Garnishments released and we also established an IRS Installment Agreement so that Alex could pay off that $17,000 balance he owed at a very affordable rate of $175.00 per month.
Once the good news came in, Alex told us to bill his credit card for the remaining balance that he owed us for filing his own tax returns to replace each IRS Substitute Return. Needless to say he was ecstatic and he has never missed a tax return filing again. How do we know for sure? Simple.
Because we prepare his taxes for him every year now. Alex didn’t just find the relief he needed, he became our client for life.
IRS Substitute Tax Return – How Do You Get Started?
We advise any taxpayer who contacts us for this service to download our Client Information Package. The Package includes several Client Information Sheets that will give us all of the taxpayer information we will need to get started. If you have any questions about how to fill out any of these forms, please feel free to contact us (email is best) so we can help you through the process.
Once you’ve completed the Client Information Sheets, fax/email us a copy of the Package so we can get started right away.
IRS Substitute For Return Fees
If you are one of our previous IRS Tax Levy Release clients, then we will charge you a flat fee of $195.00 per income tax return for this service. Similarly, if you are a new client seeking this service, then we will charge you the same fee of $195.00 per IRS Substitute For Return that we have to correct and replace. To help reduce the burden of these charges, we cap your costs at $1,195.00 no matter how many income tax returns we must prepare and file for you.