Substitute for Return (SFR) Flashcards
What is a Substitute for Return (SFR)?
An SFR is a tax return prepared by the IRS on behalf of a taxpayer who has not filed a return. It is authorized under IRC § 6020(b).
How is an SFR prepared?
The IRS prepares an SFR using information reported by third parties and may not include deductions the taxpayer might be entitled to claim.
What are the consequences of an SFR?
An SFR may lead to an assessment of tax, interest, and penalties, and the taxpayer will have a limited time to challenge or replace the SFR with a filed return.
How can a taxpayer replace an SFR?
A taxpayer may file a proper return to replace an SFR, and the IRS will generally adjust the assessment to reflect the properly filed return, as guided by IRC § 6020(b).
What rights do taxpayers have concerning an SFR?
Taxpayers have the right to be notified about the SFR and may have the right to appeal the SFR assessment under certain circumstances. Revenue Ruling 2004-29 further elaborates on the appeals process.
What is the statute of limitations for an SFR?
There is no statute of limitations for assessing tax if a return is not filed, as per IRC § 6501(c)(3). An SFR does not start the statute of limitations for assessing tax.
Can the IRS file an SFR for any type of return?
The IRS may prepare an SFR for various types of returns, including income, employment, and excise tax returns. Revenue Ruling 74-203 provides specific examples and procedures.
What is the significance of Revenue Ruling 2005-59 in relation to SFR?
Revenue Ruling 2005-59 provides guidance on determining the amount of an accuracy-related penalty under IRC § 6662(b)(1) and (2) when an SFR has been prepared by the IRS.
How does an SFR affect the taxpayer’s ability to claim refunds?
An SFR is not considered a filed return for purposes of claiming a refund. The taxpayer must file an original return to claim a refund within the limitations period under IRC § 6511.
What is the relationship between SFR and the Trust Fund Recovery Penalty (TFRP)?
An SFR may be used to establish liability for the Trust Fund Recovery Penalty under IRC § 6672, relating to the failure to collect or pay over tax.
