Glossary

Substitute for Return (SFR)

A Substitute for Return (SFR) is a tax return filed by the IRS on behalf of a taxpayer who has failed to submit their required return. When the IRS files an SFR, it does not consider deductions, credits, or other tax benefits that the taxpayer may be entitled to, which often results in a higher tax liability than if the taxpayer had filed on their own.

The IRS typically files an SFR after issuing multiple notices, such as the CP14 Notice and the CP501 Notice, without receiving a response. Once an SFR is filed, the IRS will assess the taxes owed based on available information, such as Form W-2 or Form 1099 income reports.

Taxpayers who receive notice of an SFR should file their own tax return as soon as possible to correct the information and claim any deductions or credits. Filing a return after an SFR has been issued can reduce the tax liability and stop further IRS collection actions.

Recommendation

CP2005 Notice: Confirmation That No Change is Necessary

The IRS CP2005 Notice confirms that after reviewing the taxpayer’s return, no changes are required, and no further action is necessary.

Installment Agreement (IA)

An Installment Agreement is a payment plan that allows taxpayers to repay their tax debt over time in monthly installments.

CP12 Notice: Changes to Your Tax Return – Refund or Balance Due

IRS CP12 Notice informs taxpayers of changes made to their tax return due to miscalculations, and explains if a refund is due or a balance is owed.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is a supplemental tax system that requires certain high-income taxpayers to calculate their taxes twice and pay the higher amount.

Reasonable Cause

Reasonable cause is a valid explanation, such as illness or natural disaster, that taxpayers can use to request IRS penalty abatement.

CP14H Notice: Health Coverage Tax Credit Balance Due

IRS CP14H Notice informs taxpayers that they have a balance due related to the Health Coverage Tax Credit (HCTC) and provides steps for payment.

Earned Income Credit (EIC)

The Earned Income Credit (EIC) is a refundable tax credit for low- and moderate-income earners, helping reduce their tax liability and providing a possible refund.

IRS Form 1040: U.S. Individual Income Tax Return

IRS Form 1040 is the standard tax form used by U.S. individuals to file their federal income tax returns, reporting income, deductions, and credits.

Federal Payment Levy Program (FPLP)

The Federal Payment Levy Program (FPLP) allows the IRS to levy federal payments, such as Social Security benefits, to collect unpaid tax debt.

Letter 3127C

IRS Letter 3127C confirms that changes have been made to an existing Installment Agreement, including revised payment amounts and due dates.