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If you fail to file, the IRS may file a substitute return for you. This return might not give you credit for deductions and exemptions you may be entitled to receive. This is generated based on third-party information provided to the IRS. This typically includes income information derived from a W-2 or 1099. It will not, however, include any tax credits or deductions you may be eligible to receive. Additionally, the IRS will use the filing status of single or married filing separately and only take the standard deduction. It will not itemize. This may lead to a much higher tax liability than if you had filed on your own.
The Substitute for Return process begins when the IRS receives information that you may have a filing obligation but there’s no record of your return in its system. You’ll receive IRS Notice CP2566, alerting you that the IRS calculated your taxes (including interest and penalties) based on wages and other income reported to them. You will then have 30 days to resolve this.
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