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Internal Revenue Code 6020(b). Return prepared by the Internal Revenue Service because the taxpayer did not file a tax return.
IRC 6020(b), Substitute for Return Case Processing. The Law and the Authority.
- When a taxpayer refuses to file an employment tax return, the return may be prepared by the Service under the authority of IRC 6020(b) in either of the following two ways:
- Collection personnel prepares a tax return that reflects the proposed tax for assessment under IRC 6020(b) case processing procedures; or
- Compliance personnel, IRS Staffers, generally use “substitute for return” procedures with the proposed tax shown as a liability in the examiner’s report.
- Cases developed under either method may be protested to Appeals.
- A Technical Advisory Unit of the Internal Revenue Service reviewer reviews Area office cases prior to transmitting them to IRS Appeals.
- On all agreed cases Appeals requests that the taxpayer sign the prepared tax return. If the taxpayer agrees to a revised tax, request the taxpayer sign a new return. In either case, the return is marked “Delinquent”.
- Unagreed cases:
- Employment tax cases ( 941, 944 ) cannot be litigated in the Tax Court. Therefore any unagreed employment tax case is assessed without issuing of a notice of deficiency. The proposed tax return prepared by the originating office, or a revised tax return prepared by the IRS Agent is processed for assessment.
- The IRS Agent signs, dates and prints his/her title on the “Date, Signature and Title” line of the return. The following statement is typed or printed below the signature:”This return was prepared and signed under the authority of Section 6020(b) of the Internal Revenue Code”. The person signing this tax return must have the authority to prepare such a tax return. The authority is not given to a lower GS personnel. For information on application of the failure to file and failure to pay penalties, see IRM 20.1.2, Failure to File/Failure to Pay Penalties.
Under the Internal Revenue Code, the IRC 6020(b) provides a way to prepare returns and secure assessments from non-filing taxpayers who:
- Have an open filing requirement
- Do not file a return as required
- After receiving letters from the Internal Revenue Service, failed to reply to the Services request to file tax returns
How and why does the Internal Revenue Service process Business Returns IRC 6020(b), when the taxpayers have failed to file:
- Internal Revenue Code 6020(b) is the authority given to the Commissioner of the Internal Revenue Service to prepare and process returns for non-filing business taxpayers.
- Delegation Order No. 182 (Rev. 7), extends 6020(b) authority to Internal Revenue Agents; Tax Auditors; Revenue Officers, GS-9 and above; Collection Support Function Managers, GS-9 and above; Automated Collection Branch Unit Managers, GS-11 and above; Customer Service Collection Branch Managers, GS-10 and above; and Tax Resolution Representatives, GS-9 and above.
Logistics of 6020(b) Processing
Process a return under the provisions of IRC 6020(b) for Business Accounts returns if:
- The entity appears to be liable for the return
- The person required to file the return does not file it
- Attempts to secure the returns fail
The following Business returns are the returns usually prepared under the provisions of IRC 6020(b):
- Form 941 Employers Quarterly Federal Tax Return
- Form 940 Employer’s Annual Federal Unemployment tax Return
- Form 720 Quarterly Federal Excise Tax Return
- Form 944 Employer’s Annual Federal Tax Return
These 6020 (B) are usually processed out of the Ogden Utah IRS Campus. The returns are usually processed for a period of 3 back tax years. There is an undisclosed dollar criteria that the IRS will not process. These dollar amounts are kept under wrap and key but guesses are cases under $10,000 may not be brought out to the field because of a risk reward basis.
Federal and State Information Sharing Agreements
- Different government Agencies between the Federal and State share agreements. They share the information regarding 6020(b) assessments. Agreements usually require the sharing of information as tax returns are assessed.
- Be careful of unauthorized taxpayer information disclosures which will occur if you give more information than the Federal and state agreement specifies to share with the taxpayers’ state of residence. With the new age of computer share and computer mapping techniques available this sharing of information will be very prominent as we march forward into the computer technology age. These programs have existed for years but these matching programs are going to rake in billions of dollars over time.
- If these agreements are active, maintain the integrity of the agreement by:
- Sharing weekly information regarding return assessments using information from the A6020b system
- Providing information specified in the agreement and requested by your federal/state coordinator
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