Master File Decoder Program (OFFSITE LINK)- identifies illegal
Substitute For Returns in your IRS Individual Master File.
26 U.S.C.A. §6020: Returns
prepared for or executed by the Secretary-Annotated version
History of 26 U.S.C. §6020(b): The statute that allegedly
authorizes Substitute for Returns. The history of that legislation
shows that assessment authority only exists for taxes that have a liability
statute, which Subtitle A taxes DO NOT.
"assessment" defined: Authority
of IRS to make an assessment on you for Subtitle A income taxes.
In most cases, they have NO authority!
Substitutes for returns are not "returns," but rather constitute
return information. The certification of an SFR should state something
to the effect that it is "A Substitute For Return package prepared
by IRS." The substitute for return may not be a traditional tax
return, but may consist of one or more documents that together support
the assessment of tax. In these cases, it will be especially important
to appropriately identify on the Form 2866 the document(s) being
certified. See (5) and (6) below.
1. The following
returns may be prepared, signed and assessed under the authority of
A. Form 940,
Employer’s Annual Federal Unemployment Tax Return
B. Form 941,
Employer’s Quarterly Federal Tax Return
C. Form 943,
Employer’s Annual Tax Return for Agricultural Employees
D. Form 720,
Quarterly Federal Excise Tax Return
E. Form 2290,
Heavy Vehicle Use Tax Return
F. Form CT–1,
Employer’s Annual Railroad Retirement Tax Return
G. Form 1065,
U.S. Return of Partnership Income.
to IRM 184.108.40.206, Delegations of Authority, Order Number 182 (rev. 7),
dated 5/5/1997, revenue officers GS-09 and above, and Collection Support
Function managers GS-09 and above, have the authority to prepare and
execute returns under IRC 6020(b).
NOTE: Do you
see any of the following forms in the list above: 1040, 1040EZ,
Preparation and Approval of 6020(b) Returns
- ICS now provides revenue officers the ability to prepare
returns and letters on their ICS laptop. Compliance Territory
Managers are encouraged to fully utilize the ICS 6020(b)
program. However at local management option, and with the
concurrence of the Compliance Services, Case Processing,
Territory Manager, the Field Support Function may perform
all phases of the IRC 6020(b) clerical and review process.
This includes signing of returns and submitting them for
- Use Form 5604, Section 6020(b) Action Sheet, to prepare
returns under the authority of IRC 6020(b). The revenue
officer should fully document their ICS history with a complete
explanation of the basis for the assessment(s). The explanation
should include information such as wages paid, income tax
withheld, FTD's or payments, and any calculations or other
information they used to establish the correct liability
for each tax period. This information is important because
it could be utilized later should the taxpayer request an
appeal, file suit, or file Form 911 with the Taxpayer Advocate
- Attach a copy of the ICS history documentation that
explains the basis for the assessment(s) to Form 5604. This
will eliminate the need for the revenue officer to complete
the "basis for assessment" section on Form 5604.
- Use the taxpayer’s records or other reliable sources
to determine the amount of wages paid, the amount of income
tax and FICA tax withheld, and other necessary information.
Use the following to prepare Forms 940, 941, 942 and 943:
- Compute daily wage information times 91 days.
- Compute weekly wage information times 13 weeks.
- Compute monthly wage information times 3 months.
- Compute annual wage information by multiplying
appropriate days, weeks and months times amount(s)
- Use the following method of tax computation for preparing
returns when actual wage amounts are not available.
- Withholding is 20% of the wage amount when the
actual amount is not provided by the taxpayer.
- FICA should reflect the correct rate for the
- Use the wage amount from the last period satisfied
(LPS) adjusted by the inflation factor to compute
wages for IRC 6020(b) returns. The inflation factor
is a percentage (2.5%) applied against the wage
amount from the LPS. To compute the inflation factor
for a delinquent period, multiply 2.5% times the
number of quarters between the Del Ret period and
the last period satisfied (LPS). Then, add the inflation
factor to the wage amount from the LPS. This total
is the wages to be used on the IRC 6020(b) return.
- If a "final" return is prepared under IRC 6020(b),
be sure to indicate it as "final" under " date last
wages paid" .
- The inflation factor is not applicable if the
Del Ret module is BEFORE the LPS module data.
Do not calculate the inflation factor if the LPS
is 200206 and the delinquent period is 199912.
- Use the following procedure for preparing Partnership
Do not prepare a Partnership return under the provisions
of IRC 6020(b) if Revenue Procedure 84–35 applies to
a small partnership (10 or less partners) that meets
"reasonable cause" provisions for failure to file and
you have verified that each partner has individually
and fully reported his share of partnership income (see
section 11.7.1 for Del Ret closing actions).
- For Form 1065, complete the name, address, and
EIN portion of the form along with the number of
schedule K-1s that will be attached. If you know
the gross receipts, then also complete lines 1a,
1c, and 8. These lines should all contain the same
amount. This is all that is completed on Form 1065.
- Schedule K-1 should also be completed and attached
to Form 1065. A Schedule K-1 is completed for each
known partner. Partners can be individuals, other
partnerships, trusts, S-Corporations, or Corporations.
On all cases, complete the Partners identifying
number, name, address, and zip code, as well as
the Partnership's identifying number, name, address,
and zip code.
- If the revenue officer does not know what the
Partnership's income was for the tax year, then
do not complete any thing else on the Schedule K-1.
- If the revenue officer knows what the Partnership's
income was for the tax year (line 8 on Form 1065),
then complete line 1 on Schedule K-1. If the revenue
officer knows what each partner's distribution of
income percentage is, then prepare each K-1 appropriately.
If the distribution of income percentage is unknown,
then divide the distribution of income equally among
the partners, and reflect that amount on the K-1.
Example: $100,000 total distributive income (Line
8 from the Form 1065) and four partners. Then $25,000
will be reported on each partner's K-1.
- Partnerships don't pay tax, but instead pass
through income and deductions to their partners,
who then report it on their income tax returns.
Therefore, it is important to know that the main
objective of ensuring the Form 1065 and Schedule
K-1 is filed, either voluntarily by the Partnership
or under IRC 6020(b) authority, is to ensure that
the partners have accurately reported their share
of the Partnership income. It is important for the
revenue officer to appropriately follow up on each
partner's filing requirements for the delinquent
tax year. If appropriate, revenue officers should
consider a referral to Exam, Form 3449, if partners
failed to report Partnership income. If potential
fraud exists, then the revenue officer should follow
6.2 of this section, Referrals to Criminal Investigation.
- Prepare a return for the current tax period if that
period becomes delinquent during the IRC 6020(b) process.
- Prepare the tax returns in sets. A completed set includes
an original and one copy of each return for each tax period.
- Mail Letter 1085 or 1616 along with the original returns
and all applicable enclosures, to the taxpayer. ICS macros
should contain Letters 1085, and L1616 (used for Partnership
returns). Retain a copy of the letter and tax returns in
the case file.
- Should a taxpayer file bankruptcy after a letter 1085
or 1616 has been mailed, immediately inform Insolvency and
provide them with copies of the proposed returns. Unless
instructed otherwise, continue 6020(b) processing.
Referral to ASFR
- The Automated Substitute
for Return (ASFR) process prepares
a Substitute for Return for
individuals who fail to file
after notification. ASFR uses
Information Return Program (IRP)
information posted to the Information
Returns Master-file (IRMF) to
calculate potential tax due
and issue a Notice of Deficiency.
If no return is secured 90-120
days after the Notice of Deficiency
is issued, ASFR assesses the
tax due based on the calculation.
If the taxpayer is overseas
then the Service cannot
assess until after 150 days.
- ASFR is authorized to prepare
an individual’s income tax return
under Section 6020(b) of the
IRC and the regulations thereunder.
The automated process is located
in the campuses.
- Refer Del Rets to ASFR processing
if the case meets ASFR criteria.
The referral must meet a minimum,
"net tax due" amount, (see LEM
220.127.116.11.3.1) and all of the
- The Del Ret Module
is in Status 03;
- There are less than
60 IRP documents for
the tax year referred
(if not, see section
- IRP exists on Master-file
CC Supol for the module
(if not, see section
- There is no current
or pending TC 530 on
the account (see sections
6.1 or 6.3.2);
- There are no unresolved
(status 22, 24, 26)
Bal Due modules (see
section 6.1 or 6.3.2
- There are no -V,
-W, -L, or -Z freezes
on the module or account
(see section 6.1);
- The Select Code
is not a CI or IRS employee
If Del Ret module(s)
is not in status
03, take action
to either accelerate,
(i.e.; status 02
modules) or reverse
the satisfying transaction
- Document ICS history with
the ASFR referral decision and
J; Transfer to ASFR (IMF only)" to close the ICS
Del Ret module and systemically
refer the case to ASFR processing
- If contact is made with
a taxpayer whose return is being
prepared by ASFR, attempt to
secure the return(s), however,
do not issue a summons if the
taxpayer refuses to file.
- If a return is secured for
a period previously referred
to ASFR, that has not been assessed
(no TC290 or TC300), scan the
return as an attachment and
send to the Brookhaven Campus
using secure E-mail. Use the
following E-mail address for
the Campus: *SBSE
ASFR CFf referrals.
Use the following address for
ASFR if e-mail cannot be used:
Holtsville, New York
- If a return is secured for
a period that has been assessed,
process the return as a Request
for Reconsideration. See Interim
Guidance memorandum SBSE-05-0906-035;
dated September 1,2006 and IRM
5.1.20 for detailed instructions.
- E-mail contact may be made
directly with the ASFR unit
in various other situations
after a nonfiler has been referred
to ASFR. The most common reasons
for contact include:
- Prioritize a case
with substantial net
tax due (See LEM 18.104.22.168.3.1)
- Prioritize a case
with pending collection
activity (i.e.; pending
- Retrieve a case
to ASFR, (i.e.; Fraud
for ASFR contact
by sending the secure
E-mail through your
Use the following E-mail
address to contact the Campus
ASFR unit: *SBSE
ASFR CFf referrals.
Use secure E-mail for all correspondence
with the ASFR mailbox.
1. When a taxpayer fails to file a return as prescribed by law,
they are sent a series of notices advising them of the delinquency condition.
If the taxpayer does not respond to the notices, a final notice is sent
informing them that the Service is authorized to prepare a substitute
return unless they file a correct signed return within the period allowed
by the notice. The ASED is based on the receipt of the taxpayers return
and not the SFR assessment
- The SFR program and its automated version (ASFR) were developed
to deal with taxpayers who have not filed personal income tax returns
voluntarily and for whom income information is available to substantiate
a significant income tax liability without costly field investigation.
The purpose of the program is to assess the correct tax liability
- Securing a voluntary income tax return from the taxpayer.
- Computing tax, interest, and penalties based upon the IRP
documents submitted by payers or other internally available
- A TC 290 accompanied by a DLN with a blocking series of 540-549
or 640-649, indicates an SFR assessment. Also, a TC 150 which shows
tax class 2, document code 10 and blocking series 00-299 in the
DLN is an SFR assessment.
Missing Taxpayer Signature(s)
- Refer to signature requirements contained in IRM 3.11.3,
Individual Income Tax Returns. These procedures also apply to
Forms 8453/8453-OL and the Letter 2939 jurat. The taxpayer's
signature(s) is acceptable anywhere below the jurat.
- If a properly signed Form 1040/A/EZ is attached to Form
8453/8453-OL, it is acceptable for the signature.
To avoid the possibility of the attached Form 1040 being
processed through the pipeline, mark Form 1040 with a large
"X" . If the taxpayer's signature appears in an area of
the Form 8453/8453-OL other than the signature line, arrow
it to the signature line and continue to process.
- If no signature is found, follow procedures in IRM 22.214.171.124.8.3,
Processing Procedures for Incomplete Forms 8453/8453-OL.
26 C.F.R. 301.6020-1(b): Returns prepared or executed by district directors
or other internal revenue officers.
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY-- (Continued)
PART 301--PROCEDURE AND ADMINISTRATION
(b) Execution of
(1) In general.
If any person required by any internal revenue law or by the regulations
prescribed thereunder to make a return (other than a declaration of
estimated tax required under section 6015 or 6016) fails to make such
return at the time prescribed therefor, or makes, willfully or otherwise,
a false or fraudulent return, the district director or other
authorized internal revenue officer or employee shall make such return
from his own knowledge and from such information as he can obtain through
testimony or otherwise.
(2) Status of returns. Any return made in accordance
with subparagraph (1) of this paragraph and subscribed by the district
director or other authorized internal revenue officer or employee shall
be prima facie good and sufficient for all legal purposes.
(3) Deficiency procedures.
For deficiency procedures in the case of income, estate, and gift taxes,
see sections 6211 to 6216, inclusive, and Sec. 01.6211-1 to 301.6215-1,
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY-- (Continued)
Discovery of Liability and Enforcement of Title
Sec. 301.7701-9 Secretary or his delegate.
(a) The term 'Secretary
or his delegate' means the Secretary of the Treasury, or any officer,
employee, or agency of the Treasury Department duly authorized by the
Secretary (directly, or indirectly by one or more redelegations of authority)
to perform the function mentioned or described in the context, and the
term 'or his delegate' when used in connection with any other official
of the United States shall be similarly construed.
(b) In any case
in which a function is vested by the Internal Revenue Code of 1954 or
any other statute in the Secretary or his delegate, and Treasury regulations
or Treasury decisions approved by the Secretary or his delegate provide
that such function may be performed by the Commissioner, assistant commissioner,
regional commissioner, assistant regional commissioner, district director,
director of a regional service center, or by a designated officer or
employee in the office of any such officer, such provision in the regulations
or Treasury decision shall constitute a delegation by the Secretary
of the authority to perform such function to the designated officer
or employee. If such authority is delegated to any officer or employee
performing services under the supervision and control of the Commissioner,
such provision in the regulations or Treasury decision shall constitute
a delegation by the Secretary to the Commissioner of the authority to
perform such function and a redelegation thereof by the Commissioner
to the designated officer or employee.
(c) An officer or
employee, including the Commissioner, authorized by regulations or Treasury
decision to perform a function shall have authority to redelegate the
performance of such function to any officer or employee performing services
under his supervision and control, unless such power to so redelegate
is prohibited or restricted by proper order or directive. The Commissioner
may also redelegate authority to perform such function to other officers
or employees under his supervision and control and, to the extent he
deems proper, may authorize further redelegation of such authority.
(d) The Commissioner
may prescribe such limitations as he deems proper on the extent to which
any officer or employee under his supervision and control shall perform
any such function, but, in the case of an officer or employee designated
in regulations or Treasury decision as authorized to perform such function,
such limitations shall not render invalid any performance by such officer
or employee of the function which, except for such limitations, such
officer or employee is authorized to perform by such regulations or
Treasury decision in effect at the time the function is performed.