Substitute for Returns: Why They Can’t Be Discharged in Bankruptcy

For some taxpayers, bankruptcy can provide relief from overwhelming debts. But if the IRS has filed a Substitute for Return (SFR) on your behalf, there’s an important catch: SFR-based tax debts generally cannot be discharged in bankruptcy.

Why Bankruptcy Relief Is Limited

Bankruptcy laws only allow discharge of income taxes if:

• You filed the tax return yourself, and

• Certain time and compliance rules are met.

With an SFR, the IRS—not you—filed the return. That means the bankruptcy court considers it a valid assessment, but not one you can wipe out.

What This Means for Taxpayers

• SFR debts stick: Even if you qualify for other debt discharge, SFR-based taxes will remain.

• Filing matters: Submitting your own accurate return is what opens the door to potential bankruptcy relief later.

• Other IRS options: Even if bankruptcy won’t help, programs like installment agreements, offers in compromise, or penalty abatement may still apply.

The Takeaway

An SFR locks in an IRS balance that bankruptcy won’t erase. The only way to preserve future relief options is to file your own return—even if it shows the same numbers.

If you’re considering bankruptcy as part of your financial reset, don’t let an SFR block your path. File your own returns to keep all resolution tools available.

If the IRS filed for you, now is the time to act. Filing your own return protects your options and can reduce what you owe.