What Are Substitute Returns? 

  • If taxpayers fail to file their taxes, by laws the IRS and State Taxing Authorities may file a Substitute Tax Return for taxpayers because Taxing Authorities have  obtained gross income submitted by other third parties.    

  • Substitute Returns may not include any credits, deductions, allowances, or expenses that taxpayers have had. In short the tax liabilities are generally larger than expected.     


  • Taxpayers have a short period of time to file and pay all tax dues or file a petition in Tax Court. Taxpayers cannot request an extension if they receive Notice of Deficiency. 

  • The worst thing taxpayers do is to ignore or do nothing at all when they receive letters or notices. Taxpayers must seek for professional help the sooner the better.

The IRS & State Back Taxes   


Taxpayers may be assessed back taxes for several reasons. Either taxpayers did not file income taxes even though they had income higher than the required income thresholds for required tax filings or they did file their taxes but did not pay in full the tax dues. The reasons occur either unintentionally or intentionally. Back taxes generally come with penalties and interest.  

Per IRS publication 594 and IRS Tax Topic 201, the IRS can proceed and collect taxes up to 10 years from the date they were assessed. For California, state tax laws may allow them to proceed even more than 10 years. Some back tax situations are handled harder than a tax audit due to the following:   

  • Back taxes may be assessed to multiple years for both Federal & State when a tax audit may happen to one particular year. All a sudden taxpayers have to deal with multiple year tax issues instead of one year.    

  • Taxpayers have to deal with a huge amount of tax dues collectively to both Federal and State at one time when these taxpayers had already spent all the income without saving some of their earnings for taxes quite a long time ago. Due to large tax amount dues, taxpayers may not be able to pay off tax liabilities in full at one time. Penalties and interest are added up to make the case worse.   


  • Most taxpayers could have lost their tax documents after a long time period. It is crucial now that they may not be able to prove their true income or expenses to lower the tax bills. On top of it, by laws the IRS or State Taxing Authorities are allowed to file taxpayer's tax returns with their "Substitute Returns" and send taxpayers big tax bills. If taxpayers receive a notice CP3219N, they could have lost their right to request an extension.

  • Back taxes come with collections and legal enforcement actions such as levy on wages, bank accounts, liens and many other legal actions that adversely affect taxpayers credit history, public records or prevent taxpayers from doing many other things until their taxes are fully paid.     

Taxpayers should comply with tax laws to file their tax returns on time. However if you happen to be in back tax situations with the IRS or California FTB for any reasons, discuss with our CPA or Enrolled Agent so we can help you resolve your issues. We have helped many clients to resolve multiple back taxes issues and save them taxes. Contact our office at 949-387-4321 for an appointment. 

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