What is a 'Substitute Return'

A substitute return is a substitute tax return that the Internal Revenue Service (IRS) will file on a taxpayer’s behalf, if the taxpayer has failed to file a tax return within a certain period of time. The IRS will estimate what it thinks should be on a taxpayer’s tax return by referencing information provided to it throughout the year from the taxpayer’s employer, bank, or other reporting institution. Because the Internal Revenue Service must calculate the tax a filer owes based on incomplete information, a substitute return will likely be inaccurate, and could result in the government believing that a taxpayer owes more money than they actually do.

BREAKING DOWN 'Substitute Return'

A substitute return may be filed on your behalf if you are delinquent in filing your taxes on time. After the Internal Revenue Service has filed a substitute tax return on your behalf, it will send you a Notice of Deficiency proposing what it believes you owe the government. This is also known as a 90-day letter, because you have 90 days to file a petition in tax court to challenge or otherwise respond. If you have not received your 90-day letter, you can file for an extension with the tax court.

Once a substitute return has been filed on your behalf, it can lead to you owing the government money, regardless of whether the information on the substitute return is entirely accurate. For this reason, it is in your best interest to contact the IRS if a substitute return has been filed. If information is inaccurate, you can call the IRS at 1-866-681-4271. You may also want to contact the provider of the incorrect information, like an employer or bank, to have that filing corrected. Once you have all the correct information, you should submit it when you do file your return with the IRS.

Consequences of a Substitute Return

If the government files a substitute return on your behalf, you may start incurring late fees, and eventually the IRS may levy​​​​​​​ your property or income. In this case, it will be authorized to seize your property or potentially garnish your wages, until it has made back what you owe. In such a scenario, the IRS will file a public document called Notice of Federal Tax Lien to notify you, your customers or vendors that the government has the right to seize your property. If this happens, you should contact the IRS or a tax professional so that you can pay your tax debts.

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  2. 90-Day Letter

    90-Day Letter is an IRS notice sent after an audit asserting ...
  3. Tax Season

    Tax season is the time period between January 1 and April 15 ...
  4. Taxpayer

    A taxpayer is an individual or business entity that is obligated ...
  5. Filing Status

    Filing status is a category that defines the type of tax return ...
  6. Back Taxes

    Back taxes are taxes that have been partially or fully unpaid ...
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