Ms. Austerman came to us in July of 2008 with debts to the IRS totaling $44,000.00. After further research we came to the conclusion the IRS had filed the 2003 return for her. These are called Substitute for Returns or SFR's. When the IRS files SFR's for an individual the IRS cannot take into account any deductions, itemization's, or losses. Therefore, the IRS will hold an individual to the maximum amount owed by law. The IRS had levied her bank accounts prior to retaining our services and had continued to garnish her Social Security Income, her only source of income at the time.
As soon as we found out the IRS was attempting to collect on a substitute return we referred her to our in house preparer. We were able to prepare her 2003 return along with the others (2004 through 2007) and get them in to the IRS by the specified deadlines. Due to the IRS wanting to aggressively collect on the outstanding debt of $44,000.00 we had to complete follow ups throughout the duration of her case. These calls were of utmost importance in order to ensure the IRS did not take any additional aggressive measures to collect, i.e. bank levies, seizure, or wage garnishments. With the returns in and processed she received refunds totaling $15,000.00. The IRS also released the Social Security Garnishment that was in place.
We are still working with Ms. Austerman to get her 1999 through 2002 returns filed before the IRS attempts to do the same thing.
Lesson: File all returns promptly before the IRS files them for you.