Travis Watkins explains the tax code and urges taxpayers to seek help if they have unfiled 941s, or 1040s.

If you are delinquent in filing your 1040 tax return, under tax code 6020(b), the IRS has the right to file a tax return for you.  This is called filing a “Substitute for Return,” or in tax speak, fling an ASFR, or SFR.  Or in the case of delinquent 941s, this is called filing a “6020(b)” referring to the tax code from which this rule was derived.

Here is how an SFR is done.  After a series of demand letters have been sent, the IRS will send a Notice Of Deficiency alerting the taxpayer that they are assessing tax to satisfy the filing delinquency.  The taxpayer has 60 days to appeal this assessment; if no response, the IRS will process your tax based on the income information they have on file. 

The IRS knows what income a taxpayer had, for the most part, because whenever a taxpayer receives a w-2 or 1099, another copy is also sent to the IRS.  They put this information into their database and it is available to the taxpayer, if requested, via Wage & Income Transcripts.  After they have your income data input, the IRS will put the taxpayer in the worst possible filing status, tax bracket and will only give the standard deduction.  This creates the worst possible tax liability scenario.  See Part II for my Secret Solutions to SFRs!