Will the IRS Do Your Taxes For You?
Yes, the IRS will do your taxes for you if you file to file a required tax return and the IRS assigns you to its Automated Substitute for Return (ASFR) unit.
A return the IRS prepares for you is called a substitute for return (SFR).
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Why Does the IRS Do Your Taxes For You?
The IRS does your taxes for you because it wants to collect taxes from you.
Before under Internal Revenue Code § 6502 “Collection After Assessment”, before the IRS can collect a tax from you, it must first assess the tax.
The assessment of a tax is the formal recording of a taxpayer’s tax debt — including penalties and interest — in the government’s books, that is, its financial records.
The typical basis for the IRS assessing a tax is when a taxpayer files their tax return.
If you’ve ever filed a tax return before, you’re familiar with this process:
- If you file your return, and the amount you’ve paid in through the year is more than the amount of your tax liability, then after the IRS assesses the tax, it will send you a refund, which is the difference between what you’ve paid in and the assessment.
- If you file your return, and the amount you’ve paid in through the year is less than the amount of your tax liability, you will hopefully pay the tax with the return, but if you don’t, the IRS will send you a bill, such as a Notice CP14, after it makes its assessment based on the return. And if you continue to not pay, the IRS will eventually take forced collection activity against you in the form of wage garnishments, bank levies, etc.
But what if you don’t file your tax return for a given year? Well, the IRS still wants to collect the tax you owe for that year, so it will do your taxes for you in the form of a substitute for return (SFR) and assess your tax liability based on that SFR unless you contest the SFR by either filing an original return for the year in question or by contesting the IRS’s proposed assessment in Tax Court.
Who at the IRS Files Your Taxes For You?
A computer system at the IRS files your taxes for you. This computer system is called the Automated Substitute for Return (ASFR) system, and it’s described by the IRS in Internal Revenue Manual Section 5.18.1.2(1) as “a stand-alone system residing on a SUN Microsystems platform at the Enterprise Computing Center.”
So it’s not like there are all these IRS employees with dealer’s visors preparing this return for you; it’s a computer system.
How Does the IRS Do Your Taxes For You?
And the IRS ASFR system does your taxes for you by taking the income data that third parties have furnished to the IRS on tax forms — common examples are Form W-2, Form 1099, Schedule K-1, etc. — and performing calculations on them calculate your adjusted gross income, taxable income, and tax liability for the year, and voila — your SFR is born.
After preparing your SFR, the IRS ASFR Program will then send you Letter 2566 — which is a 30-day letter — to inform you that the IRS has prepared an SFR for you. If that letter is not responded to, the IRS will send you a 90-day letter, such as Letter 3219N, before assessing the liability based on the SFR, assuming you don’t deal with the issue before that 90-day period ends.
Author:
Logan Allec, CPA, Founder and Owner
Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.
