Substitute for Return? Don't Count on the Usual Deductions

If you choose not to file your taxes for any given year, or if you simply forget to do so, the IRS has the power to file them for you under its "substitute for return" program. In order to file a return on your behalf, the IRS has to determine (or reasonably guess) your sources of income.

How Does the IRS Know Your Income if You Don’t Report It?

It can make an educated guess by interviewing your employer, or—if you're an independent contractor—your clients, and even examining your bank accounts. A revenue officer plugs all this information into a 1040, crunches the numbers, adds substantial penalties and interest, and voila! Your return has been filed for you, and you owe the government a massive tax bill.

Upon inspecting this return—which the IRS will gleefully send to you or your lawyer—you may notice some of your accustomed deductions are nowhere to be found. Do you work out of your home? Don't count on any home-office credit. Do you pay a mortgage? Well, the IRS preparer may choose to "forget" that fact.

If you're lucky, you may find your dependents listed, though you shouldn't even count on that, if you owe the IRS a substantial amount of money. Basically, it's in the government's interest to extract the highest possible amount of taxes from your yearly return. They're not going to be nearly as diligent about write-offs and deductions as your trusted accountant.

What can you do if you're presented with a Substitute for Return? An experienced Oklahoma tax lawyer can lay out the available options, which are bound to be much narrower than if you had filed your return in the first place.

Questions? Call the Oklahoma tax experts at Travis W. Watkins, PC (800-721-7054) today for a free consultation!

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