Tax Debt Relief and the Substitute Tax Return

Last updated on August 14, 2023

When you’re required to file and pay taxes but don’t, the IRS uses information from your previous tax returns and third party sources to calculate the amount you owe. The IRS then files a substitute tax return on your behalf. It’s important to remember that what the IRS assesses is an estimation of your liability, as it does not include deductions or credits that you may qualify for.

If you find that the IRS calculation is incorrect, you can file a tax return and request the IRS to amend its estimate. You’ll need to file your tax return as soon as possible, as the IRS will eventually consider the estimate final.

The IRS also files a substitute tax return so that collection actions can begin. When a notice is sent to the taxpayer to advise of a debt, it includes the amount owed along with other essential details. If the taxpayer submits a return after the IRS has filed a substitute return, the IRS will then accept the taxpayer’s calculation of the taxes.

It’s in the taxpayer’s best interest to begin resolution efforts as soon as possible. This not only helps in avoiding harsh collection actions, but also minimizes the penalties and interest that must be paid.