If you do not file a tax return, and if you are required to file a tax return, the IRS typically sends a series of letters asking you to file a tax return for the year in issue.
If you still do not file, the IRS then proposes to file a tax return on your behalf called a Substitute for Return. A Substitute for Return is produced by the IRS automated Substitute for Return Program (ASFR).
Because you did not file the tax return, the IRS does not know if you are married, if you have children, if you have a mortgage or if you give money to the church. As a result, the Substitute for Return prepared by the IRS is often highly inaccurate because it does not take into consideration the deductions to which you might be entitled.
However, in fairness to the IRS, the IRS cannot claim these deductions for you precisely because you did not file a tax return. The IRS recently announced that it has halted the Substitute for Return Program because of “resource constraints,” a reference to a lack of funds to support the program.
We are both surprised and disappointed that the IRS has shut down the Substitute for Return Program because a letter from the IRS regarding an unfiled tax return often spurs a taxpayer to prepare and file a tax return for the year in issue.
Further, by announcing the suspension of the Substitute for Return Program, people who are disinclined to file their tax returns are encouraged to continue to not file their tax returns. In recent years the IRS’ budget has been cut by more than 20% and it has lost approximately 1/3 of its employees.
As a result, the IRS has struggled to keep up with its workflow. The quality of taxpayer services has dropped dramatically and it is harder to contact the IRS and attempt to obtain a resolution.
Although there were clear problems with the Substitute for Return Program, we believe that halting the program is a bad decision that will simply allow non-filers to continue to get away with not filing their tax returns. Worse yet, it may encourage others to not file their tax returns. What do you think?