What is an SFR / Substitute For Return?

SFR is actually an abbreviation for a term that, as far as the IRS is concerned, stands for either Substitute For Return or Service Filed Return.

Effectively, an SFR, Substitute For Return, is when the IRS actually prepares a tax return for you.

Why would the IRS go through the trouble of preparing a Substitute For Return?

The reason that they do so is simply because they asked the taxpayer without a tax return on file to file one. They’ll ask you through a series of letters, each one a bit more threatening than the last.

Finally, they say, we’ve asked you a number of times to prepare a tax return, and you haven’t done so.

So we’ve prepared this tax return for you, and this is called a Substitute For Return.

If you approve of this, then do nothing.

If you don’t approve of it, then send us your tax return. A lot of people, unfortunately, will ignore the letters and won’t approve the tax return.

However, it actually gets put in the system as it is prepared by the IRS.

So that’s what a Substitute For Return is, and when it is filed, it is called making an assessment. Once the IRS makes an assessment, than the taxes are on the books.

Next the IRS moves to the next step, the collection process. Then the IRS will begin to collect the tax that they just assessed through use of the IRS collection process.