Blog Topic

Substitute for Return (SFR)
Posted by: Mark Zinn
December 20, 2007

"Substitute for Return" is the term the IRS uses for the return they file for you, if you do not file one for any given year. The most important thing to note is, it is never beneficial to have the IRS file a return for you.

First, the IRS will not spend time reviewing what deductions you should receive. They will simply give you a standard deduction, whether or not you have excess deductions which would warrant filing a Schedule A. Therefore, if you own a home, and pay interest that exceeds your standard deduction (which is almost always the case), you will not receive that benefit if the IRS files your return for you. As a result, your taxable income, and resulting tax liability, will be higher than it should be.

Secondly, the IRS will classify you as, "married filing separately", which is the least favorable category, since the standard deduction is lower.

The bottom line is, even if you know that you won't be able to pay any amount due, you still need to file your own return, so that you will have an accurate assessment of what is due. And, if you don't believe you will owe any tax, you need to file a return to show the IRS that you don't. If they have to file one for you, the SFR will likely show that you do have a tax liability.

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