Quick Answer: Why IRS SFR Bills Are Usually Wrong
IRS Substitute for Return bills are usually wrong because the IRS calculates tax using only income reported by third parties and applies the highest tax rates without deductions, credits, or proper filing status.
Filing a correct tax return often reduces the balance significantly.
Why IRS Substitute for Return Bills Are Almost Always Wrong
An IRS Substitute for Return, commonly called an SFR, is one of the fastest ways a tax balance can spiral out of control.
Many Plantation taxpayers first discover an SFR only after receiving a large bill.
Understanding how SFRs work explains why these balances are often overstated.
What an IRS Substitute for Return Is
An IRS Substitute for Return is a return the IRS files on your behalf when you fail to file.
The IRS uses information reported by third parties such as employers and banks.
The IRS does not ask questions or request documentation before filing an SFR.
How the IRS Calculates SFR Tax
When preparing an SFR, the IRS:
- Includes only gross income reported on W-2s and 1099s
- Applies the highest filing status tax rates
- Excludes deductions and credits
- Ignores business expenses
This method almost always results in an inflated tax bill.
Why SFR Balances Are So High
SFR balances grow quickly due to:
- Overstated taxable income
- Failure-to-file penalties
- Failure-to-pay penalties
- Accruing interest
By the time enforcement begins, balances can be far higher than the actual tax owed.
How SFRs Lead to Enforcement
SFRs often trigger enforcement because the IRS believes the balance is collectible.
This can lead to:
- CP504 notices
- Wage garnishments
- Bank levies
Enforcement escalation is outlined here:
IRS Notice Escalation Stages.
How to Fix an IRS Substitute for Return
The primary way to fix an SFR is to file a correct tax return for the affected year.
Filing replaces the SFR and forces the IRS to recalculate the tax.
This often results in a significant balance reduction.
Why Timing Matters When Replacing an SFR
Filing sooner limits penalties and interest and may prevent enforcement.
Waiting allows the IRS to continue collections based on an incorrect balance.
Filing impact is discussed here:
Does Filing Missing Returns Stop IRS Enforcement?.
How SFRs Tie Into Back Tax Problems
SFRs frequently appear in multi-year back tax cases.
Resolving them is often the foundation of any broader strategy.
See the full process here:
Back Taxes in Plantation, FL.
Serving Plantation, FL Taxpayers
Polaris Tax & Accounting is physically located in Plantation, Florida and assists local taxpayers with correcting IRS Substitute for Return assessments and resolving inflated balances.
Local expertise matters when enforcement risk is high.
When to Get Help With an SFR
If an SFR balance is driving enforcement or inflating what you owe, professional assistance can correct the issue and stabilize your account.
Learn more here:
Plantation IRS Resolution Services.