Glossary

Substitute for return

A substitute for return is a tax return the IRS prepares for a taxpayer who did not file, using third-party income data and no deductions, credits, or cost basis, which usually overstates the tax owed.

How it works

When a taxpayer does not file, the IRS may prepare a substitute for return under Section 6020(b) using third-party income data, with no deductions, credits, or cost basis. It assesses the resulting tax and begins collection. Filing your own return for that year, even late, generally replaces the substitute and reduces the balance, though the collection statute runs from the IRS assessment date.

Why it matters

For crypto, a substitute for return treats every reported sale as pure gain with zero basis.

Related: Notice CP59, audit reconsideration.

Guides that cover substitute for return

Related terms

Browse the full glossary

Where this comes up in our work

Tax controversy attorneys

Audits, penalties, collections, criminal exposure, and Tax Court, handled by attorneys who do this every day.

See the practice page →

Have a question about this?

Our tax attorneys handle IRS audits, crypto tax, offshore disclosures, and opinion letters for clients nationwide. Consultations are confidential.

Schedule a Confidential Consultation

Definitions are general information, not legal advice, and may not reflect the most recent changes in law.

Get Started