Substitute for return

Happy Monday, folks! As we gear up for a new week full of potential and growth (both personally and professionally), I’m excited to share a bit of my own news—I’m starting a YouTube channel! That’s right, I’ll be diving into the world of video to bring tax solutions right to your screen, helping turn those tax problems into tax triumphs.

Now, onto a less thrilling but critically important topic: Substitute for Returns (SFRs) by the IRS. Understanding this could save you a lot of headaches down the road.

What is a Substitute for Return (SFR)?

Let’s set the scene: you’ve missed filing your taxes for one reason or another. Instead of letting it slide, the IRS steps in and files a Substitute for Return. This might sound like a helpful service, but don’t be fooled—this is the IRS’s way of ensuring they get what they believe you owe, and it often doesn’t work out in your favor.

An SFR typically only includes the basic information the IRS has about your income from sources like your W-2s and 1099s. What does it miss? Pretty much everything that could benefit you. Deductions, credits, exemptions—you name it, it’s likely not included. The result? A higher tax bill than you might actually owe.

Why Can’t SFRs Be Discharged?

Here’s where it gets even stickier. A tax debt from an SFR is particularly tough because, under the law, these cannot be discharged in bankruptcy under most circumstances. Why? Because the tax return was not filed by you, the taxpayer, and bankruptcy law requires that you file a tax return for the debt to be dischargeable.

This means if the IRS has filed an SFR on your behalf, you’re stuck with this debt unless you take action. It’s a ball and chain on your financial freedom, potentially preventing you from clearing your slate even in dire circumstances.

What Can You Do About It?

File Your Actual Return: If you’ve had an SFR filed, it’s not the end of the world, but you need to act quickly. You can still file your actual tax return to replace the SFR. This is crucial because your own return will likely include all the deductions and credits you’re entitled to, potentially reducing your tax liability significantly.
Consult a Tax Professional: Navigating SFRs and their implications can be complex. Professionals like myself, Enrolled Agents who specialize in tax resolution, can help you understand your options, file your overdue returns, and even negotiate with the IRS to get penalties reduced.
Stay Compliant Going Forward: Once you’ve addressed the SFR, ensure you stay on top of your tax filings in the future. Keeping current with your tax obligations prevents the IRS from stepping in and taking matters into their own hands again.

Wrapping Up

As we launch into new endeavors, like my upcoming YouTube channel, it’s important to remember that dealing with something like an SFR head-on is always better than letting it fester. The IRS doesn’t create these substitute returns for your benefit—they do it for theirs. By taking control of your tax situation, you ensure that you’re not paying more than you need to and protect your financial future.

Stay tuned for more insights on my new YouTube channel, and remember: every tax problem has a solution. You just need the right tools and knowledge to find it. Cheers to a productive week ahead, and let’s tackle those tax issues together!

Andrew Samaniego, EA, CTRC, MSCTA

Andrew Samaniego Tax Planning & Resolution

(619) 268-1084 | AndrewSamaniego.com

Happy Fourth of July, everyone!

As we celebrate America’s independence with burgers, music, and fireworks by Lake Murray in San Diego, it’s hard not to think about the very reasons we kicked off this grand celebration back in 1776—taxation without representation.

Fast forward to today, and taxes are still a hot topic, especially if you’ve been neglecting them. Did you know that if you don’t file your tax returns, the IRS doesn’t just wait around? They take matters into their own hands by filing what’s known as a Substitute for Return (SFR) on your behalf. And trust me, it’s not as beneficial as it might sound.

The Problem with Substitute Returns

Imagine letting someone else decide what you’re going to eat at a barbecue without knowing what you like or what you’re allergic to. That’s roughly what happens with an SFR. The IRS prepares these based on the information they have, which is usually limited to your income. They don’t consider your eligible deductions, credits, or expenses, which means you could end up owing much more than if you had filed yourself.

Why You Need to Take Action

Just as our forefathers didn’t stand by to let taxes define their fate, you shouldn’t let the IRS dictate yours with a Substitute Return. Correcting an SFR is your financial declaration of independence. It allows you to replace the IRS’s version of your tax situation with one that accurately reflects your finances, often reducing the amount owed significantly, and sometimes even turning that balance into a refund.

How to Correct a Substitute Return

Step 1: Gather Your Documents Collect all relevant financial documentation from the year(s) in question—W-2s, 1099s, receipts, mortgage statements, etc. These are your ammo against the IRS’s assumptions.

Step 2: File Your Accurate Return Prepare the correct tax return for the years the IRS filed an SFR. This can either be done by using tax software that allows you to file back taxes or by working with a tax professional who can ensure that every potential deduction and credit is accounted for.

Step 3: Submit and Negotiate Once your accurate returns are prepared, submit them to the IRS. This will replace the SFRs, but the process doesn’t end there. If there are penalties and interest from the late filing, you may also need to negotiate with the IRS to reduce those penalties or set up a payment plan for any remaining debt.

Step 4: Stay Compliant Just as the U.S. continued to shape its own destiny after gaining independence, you must maintain your financial freedom by staying compliant with your tax filings moving forward.

Need Help Taking the Helm?

Navigating the murky waters of Substitute Returns can be complex and intimidating. If you’re unsure where to start or worried about going head-to-head with the IRS alone, I’m here to help. Check out my website where you can download a free e-book packed with guidance on how to handle Substitute Returns and reclaim control over your tax situation. Visit CrushIRSAnxiety.com and take the first step towards your financial independence.

This Fourth of July, while we celebrate our nation’s liberty, let’s also commit to securing our financial liberty. Don’t let Substitute Returns set the course of your fiscal future. Correct them, claim your rights, and ensure your tax situation is something that truly represents you. Here’s to a future where you hold the reins to your financial independence!

Happy Independence Day and here is a picture of my favorite firework show!