Final substitute return regs adopt temporary and proposed regs with one minor change
T.D. 9380, 2/12/2008; Reg. § 301.6020-1
In 2005, IRS issued temporary (also issued as proposed regs) that broadened the scope of when IRS-prepared substitute returns (SFR) are valid. Specifically, the temporary regs provide that a document or set of documents (including a Form 13496, Code Sec. 6020(b) Certification) signed by an authorized IRS officer or employee is a “return” under Code Sec. 6020(b) if it identifies the taxpayer by name and taxpayer identification number, contains sufficient information to compute his tax liability, and purports to be a return. IRS has now adopted the temporary and proposed regs as final regs with one minor change.
Background. Under Code Sec. 6020(b), if a taxpayer fails to file a return when required, IRS may prepare a return based on its own knowledge and on information it obtains through testimony or other means. The failure-to-pay penalty under Code Sec. 6651(a)(2) applies to the amount of tax shown on the return, including, under Code Sec. 6651(g)(2), any amount shown on a substitute return prepared by IRS. Absent the existence of a return under Code Sec. 6020(b), the Code Sec. 6651(a)(2) penalty doesn’t apply to a nonfiler.
In Cabirac, (2003) 120 TC 163, affd on other issue (2004, CA3) 94 AFTR 2d 2004-5490 (unpublished) and Spurlock, (2003) TC Memo 2003-124, the Tax Court found that IRS hadn’t prepared and signed a valid return under Code Sec. 6020(b). In Cabirac, IRS sent the taxpayer a notice of proposed adjustments with a revenue agent’s report, which showed enough information to calculate tax liability. In Spurlock, IRS had a conglomeration of IRS documents, many of them unsigned, apparently from its administrative files.
What is a return. The final regs, like the temporary regs, provide that a document (or set of documents) signed by an authorized IRS officer or employee is a return under Code Sec. 6020(b) if it identifies the taxpayer by name and taxpayer identification number (TIN), contains sufficient information from which to compute the taxpayer’s tax liability, and the document (or set of documents) purports to be a return. (Reg. § 301.6020-1(b)(2))
In addition, a valid Code Sec. 6020(b) return includes a Form 13496 or any other form that an authorized IRS officer or employee signs and uses to identify a document (or set of documents) containing the above information as a Code Sec. 6020(b) return, and the documents identified. (Reg. § 301.6020-1(b)(2))
Further, because IRS may prepare and signs Code Sec. 6020(b) returns both by hand and through automated means, the final and temporary regs provide that a return can be signed by the name or title of an IRS officer or employee being handwritten, stamped, typed, printed or otherwise mechanically affixed to the return, so long as that name or title was placed on the document to signify that the IRS officer or employee adopted the document as a return for the taxpayer. The document and signature may be in written or electronic form. (Reg. § 301.6020-1(b)(2))
Change from temporary regs. The temporary regs provided that any return made in accordance with the regs and signed by the Commissioner or other authorized Internal Revenue Officer or employee shall be prima facie good and sufficient for all legal purposes. In 2005, new language was added to the Bankruptcy Code at 11 U.S.C. § 523(a) that specifically provided that a Code Sec. 6020(b) return is not a return for dischargeability purposes. Therefore, the portion of the temporary regs that stated that the return was sufficient for all legal purposes is no longer correct. IRS changed the final regs to state that a Code Sec. 6020(b) return is sufficient for all legal purposes “except insofar as any Federal statute expressly provides otherwise.” (Reg. § 301.6020-1(b)(3))
Effective date. The final regs are effective Feb. 13, 2008. (Reg. § 301.6020-1(d))
RIA Research References: For substitute returns prepared by IRS, see FTC 2d/FIN ¶ S-1004; United States Tax Reporter ¶ 60,204; TaxDesk ¶ 570,103.