Substitute for Return (SFR)

When you do not file a tax return, the IRS can prepare one for you under IRC §6020(b). This is called a Substitute for Return. On your IRS transcript, you will see a TC 150 with the notation "per return" showing amounts that do not match anything you filed — because you did not file.

Why SFR Assessments Are Always High

The IRS builds the SFR using your information returns — W-2s, 1099s, K-1s. They know your income. But they give you the worst possible filing status (single or married filing separately), only the standard deduction, and zero credits. No earned income credit. No child tax credit. No itemized deductions. No business expenses if you are self-employed.

The result is a tax bill that is almost always dramatically higher than what you would owe on a properly filed return.

How to Fix It

File the actual return. Even years after the SFR assessment, you can file your original return and request audit reconsideration. The IRS will compare your return to the SFR, and if your return shows a lower liability, they will adjust the assessment downward. This can wipe out tens of thousands in inflated assessments.

There is no time limit on filing a return to reduce an SFR assessment. But there is a three-year limit on claiming refunds under IRC §6511. If the correct return shows a refund, you lose that refund after three years.

File the return. Get the assessment corrected. Then address whatever balance remains. We handle SFR cases regularly.

Tax attorney Darrin Mish has spent 32 years getting taxpayers out of IRS trouble. Free consultation — no obligation.