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.