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When you don’t file a tax return, the IRS might step in and file what’s known as a Substitute for Return (SFR) on your behalf. While this may sound like a helpful gesture, it’s generally not in your best interest. Here’s what happens when the government files an SFR and why you should take action to file your own return, even if you’re behind.
What Is a Substitute for Return (SFR)?
A Substitute for Return is essentially the IRS stepping in to file your tax return for you when you haven’t done so yourself. They use the information they have on file, such as W-2s, 1099s, and other income reports sent to them by third parties. However, the IRS doesn’t take into account any deductions, exemptions, or credits you might be entitled to. This is where the real trouble begins.
For instance, if you’re a business owner, the IRS won’t consider any legitimate business expenses that could reduce your taxable income. The end result is usually a tax bill that’s far higher than it would be if you had filed a complete and accurate return.
Why the SFR Is a Problem
Beyond the inflated tax bill, there are penalties and interest to worry about. When the IRS files an SFR, they don’t just send you a bill; they also assess penalties and interest on the taxes they claim you owe. These additional charges can accumulate quickly, making your tax debt even harder to manage.
What You Should Do
If the IRS has filed an SFR for you, it’s not too late to correct the situation. The first step is to file your own tax return, even after the IRS has filed an SFR. By doing so, you can claim the deductions, credits, and exemptions that the IRS didn’t include. This could significantly reduce your tax liability.
It’s important to know that filing your return doesn’t just correct the tax bill—it also shows the IRS that you’re taking steps to comply with the law, which can be helpful if you need to negotiate your tax debt or penalties later.
Taking Control
For individuals and business owners looking to get squared up with the IRS, the key is to take action as soon as possible. Whether you’re dealing with an SFR or you haven’t filed in several years, it’s time to get current with your tax filings. The longer you wait, the more complicated and expensive the situation can become.
Filing your own return, seeking professional assistance, and setting up a payment plan are all steps that can help you take control of your tax situation. By addressing the issue now, you avoid further penalties and interest, and potentially reduce your tax liability.
If you’re unsure where to start, reaching out to a law firm experienced in dealing with the IRS can provide the guidance and support you need. Weisberg Kainen Mark can help you deal with the IRS and work towards getting your tax situation resolved. Reach out today at (305) 374-5544 to take the first step toward getting squared up with the IRS.
Weisberg Kainen Mark, PL
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