If you haven’t filed your taxes for one or more years, you might be surprised to learn that the IRS can file a tax return for you. This is called a Substitute for Return (SFR) — and while it sounds helpful, it’s almost never in your favor.
An SFR is the IRS’s version of your tax return, created without your deductions, credits, or exemptions. The result? You could owe thousands more than you actually do, and soon face liens, levies, or wage garnishment if you don’t respond.
📘 Official IRS References: Understanding Your CP2566 Notice
What Is a Substitute for Return (SFR)?
When you fail to file, the IRS uses information from W-2s, 1099s, and other income statements to create a return for you under Internal Revenue Code §6020(b). This is part of the IRS’s process for handling non-filed returns and securing compliance.
Since the IRS doesn’t know your personal deductions, business expenses, dependents, or filing status, the SFR always assumes the worst-case scenario — meaning you owe the maximum amount of tax possible.
How the IRS Creates an SFR?
The IRS’s Automated Substitute for Return (ASFR) Program uses third-party information to estimate your taxable income.
💡 Pro Tip: Once the IRS issues a Notice of Deficiency, your right to appeal is limited to a 90-day window — after that, the amount becomes permanent.
📘 References: Understanding Your CP2566 Notice
Why an SFR Costs You Thousands?
When the IRS prepares your return, it uses only income data — not expenses, exemptions, or tax credits you’re legally entitled to claim.
💡 Key Takeaway: The IRS doesn’t assume any deductions, meaning your assessed balance could be 3–4 times higher than what you’d owe if you filed correctly.
Some of the Notices You’ll Receive Before and After an SFR
| Notice Code | What It Means |
|---|---|
| CP59 | This is the first reminder notice you’ll likely receive, informing you that the IRS has no record of your tax return being filed. |
| CP515 / CP516 | These are follow-up reminder notices. They are sent if you don’t respond to the initial CP59 notice. |
| CP518 | This is a final reminder notice that you have not filed your tax return. |
| CP2566 | This notice informs you that the IRS has filed an SFR with 30-day response deadline. It will summarize the income used to calculate your tax liability and explain your options for filing your own return to replace the SFR. |
| CP3219N / Letter 3219 | Statutory Notice of Deficiency. If you do not respond to the 30-day letter, the IRS will send this formal notice. It informs you of the tax deficiency based on the SFR and gives you 90 days to either file your own return or challenge the deficiency in Tax Court. If you take no action, the IRS will finalize the assessment. |
| CP14 | First notification that you owe taxes. Includes the balance, penalties, and interest accrued so far. |
| CP501 | Friendly reminder that your account remains unpaid. Still considered a non-enforcement stage. |
| CP503 | IRS warns of more serious collection action. |
| CP504 | Officially informs you that the IRS intends to seize your state refund and may levy wages or bank accounts. This is a critical legal warning. |
| Letter 1058 / LT11 | This is the final warning before the IRS seizes (levies) your property, wages, or bank accounts. |
| Letter 3172 | Informs you that a Federal Tax Lien has been recorded in public records, securing the government’s claim on your property. |
📘 Reference: IRS Notices and Letters — Overview
How to Fix an IRS Substitute for Return?
Step 1: Get a Copy of the SFR
Request your Wage & Income Transcript and Account Transcript from the IRS.
📘Reference: Get Transcript — IRS
Step 2: Prepare and File Your Own Return
File a complete and accurate return for the same tax year. Include all deductions, dependents, and credits.
Step 3: Verify the SFR Is Reversed
After processing, check your Account Transcript again to confirm the IRS has replaced the SFR with your filed return.
Step 4: Resolve Any Remaining Balance
Once your true return is accepted, you can explore payment or settlement options if you still owe:
- Installment Agreement
- Offer in Compromise
- Currently Not Collectible
- Penalty Abatement
How a Tax Attorney Can Help With an SFR?
An IRS Substitute for Return is legally binding — but reversible with the right action. A tax attorney can:
| Attorney Action | Result |
|---|---|
| Request IRS Transcripts | Identify unfiled years, SFR assessments, and deadlines |
| Prepare and Submit Correct Returns | Replace SFR assessments with accurate filings |
| Negotiate Penalty Relief | Reduce or eliminate late filing and payment penalties |
| Stop IRS Enforcement | Prevent liens, levies, and garnishments during correction |
| File Appeals or Tax Court Petitions | Protect your rights if the IRS refuses to adjust |
| Coordinate with Revenue Officers | Resolve cases faster by direct negotiation |
💡 Pro Tip: Once an SFR becomes final, only a properly filed return or Tax Court petition can reduce your balance — don’t wait until enforcement starts.
📘 Power of Attorney Form: Form 2848 – Power of Attorney and Declaration of Representative
Need help with a similar issue? Contact our firm today for a consultation.
An IRS Substitute for Return (SFR) can feel like a nightmare — but it’s one you can wake up from quickly. By filing your own return, you can reverse inflated balances, claim legitimate deductions, and avoid aggressive IRS collection actions.
If you’ve received a CP2566 notice or believe the IRS filed a return for you, contact Pelham PLLC immediately. Our tax attorneys can file corrected returns, reduce your tax bill, and protect your income and property from IRS enforcement.
FAQs
What triggers a Substitute for Return?
The IRS files an SFR when you don’t file your return and third-party income forms show you earned reportable income.
Can the IRS file an SFR for multiple years?
Yes. The IRS can file SFRs for each unfiled year within the 10-year collection statute.
Can I still file my own return after an SFR?
Absolutely. The IRS encourages taxpayers to replace the SFR with their own return — it often reduces your balance significantly.
How long do I have to fix an SFR?
You can submit your own return anytime before the IRS initiates collection. However, earlier is better to avoid lien filing.
