An Internal Revenue Service enforcement program that writes a tax return for someone who never filed one added $2.9 billion in new assessments during fiscal year 2025, according to a nationwide compliance report the Treasury Inspector General for Tax Administration issued in August. The program, called the Automated Substitute for Return, calculates what a nonfiler owes using only the wage and income data that employers, banks and other third parties already sent the agency, then treats that figure as the bill unless the taxpayer answers with a return of their own. Retirees who stopped filing after leaving the workforce, after a spouse died, or after health problems piled up paperwork nobody opened are exactly the population this mechanism reaches, and by design it works against them until they respond.
How the Automated Substitute for Return Builds a Bill Without a Return
Authorized under Internal Revenue Code Section 6020, the Automated Substitute for Return program sits inside the IRS Small Business/Self-Employed Division’s Collection Services Compliance Operation, the same unit that mails the agency’s nonfiler notices. When a taxpayer who owes a significant liability has not filed after repeated contact, the program secures a return where possible or, failing that, computes tax, penalties and interest directly from third-party information returns such as Form W-2 wage statements and Form 1099-MISC income reports. The inspector general’s fiscal year 2025 compliance review found that additional assessments from the program swung from $1.1 billion in fiscal year 2023 to just $82 million in fiscal year 2024, the year the agency was still working through a backlog left by a pandemic-era pause, before jumping to $2.9 billion in fiscal year 2025 as contact resumed on far more cases. Most of that volume moved without any conversation at all: cases closed without a taxpayer response climbed from 208,500 in fiscal 2023 to 430,900 in fiscal 2025, a 107 percent increase, meaning most of the program’s substitute returns became final without the nonfiler ever picking up the phone or answering the mail.
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A Substitute Return Skips Every Deduction, Exemption and Credit the Filer Would Have Claimed
The number a computer produces under this program is not a substitute for the return the taxpayer would have filed on their own; it is a floor. Because the calculation starts and ends with income reported by employers and payers, it cannot account for a mortgage interest deduction, an additional standard deduction for someone 65 or older, medical expenses above the threshold, dependents, or credits like the Earned Income Tax Credit. The IRS’s own guidance on delinquent filing acknowledges as much, stating plainly that a substitute return may not reflect the deductions and exemptions a taxpayer would otherwise be entitled to claim. The same is true of a spouse who could have been claimed for a joint filing, or of dependents whose exemptions never make it into the government’s estimate; the substitute return simply doesn’t ask the questions a normal Form 1040 would. For a retired taxpayer living on Social Security, a pension and modest investment income, that gap can mean paying tax on gross withdrawals or wages that a properly filed return would have reduced substantially, sometimes to nothing owed at all.
The 90-Day Notice That Follows an ASFR Assessment
Once the Automated Substitute for Return program finishes its calculation, the IRS does not simply bill the account. It sends a Notice of Deficiency, known by its form number CP3219N, informing the taxpayer of the proposed tax, penalty and interest and starting a 90-day clock, 150 days for someone living outside the country, to either file a petition with the U.S. Tax Court or file the missing return instead. According to the IRS’s own notice guidance, a taxpayer who disagrees with the proposed figure has one practical alternative to going to court: file the return the agency never received. Taxpayers whose disputed amount is $50,000 or less per tax year can use the Tax Court’s simplified small-case procedures rather than the full formal process, though the 90-day petition deadline itself does not change either way. The IRS will still accept a return filed after the 90-day window closes, but processing slows, and the proposed assessment can already be moving toward collection by then, including a levy on wages or a bank account if the notice goes unanswered.
Filing After an ASFR Assessment Still Lowers the Final Number
Filing a return in response to a proposed assessment does not erase the process, but it replaces the government’s income-only estimate with the taxpayer’s actual figures, deductions and credits included, and the IRS will generally adjust the account to match. The same three-year window that limits any refund claim also governs this money: a taxpayer who overpaid through withholding or qualified for a refundable credit must still file within three years of the original due date to collect it, or the government keeps it permanently. TIGTA’s compliance review credits the recent jump in assessments to the broader restart of the IRS’s nonfiler notice program in 2024, run out of the same Collection Services Compliance Operation that produces the Automated Substitute for Return, a single office now responsible for both flagging a nonfiler and building the return in their place if nothing else arrives.
The Paper Trail an ASFR Assessment Leaves Behind
An Automated Substitute for Return assessment ends with a notice, not a settled account, and the response is left entirely to the person who receives it: read the notice code, decide whether to answer with a return, and track what happens to any refund that return might still produce. Few nonfilers keep a system for any of that once the mail arrives, and the deadlines involved rarely get written down next to the notice itself.
The IRS Refund Recovery Kit is a 13-page kit built around a notice decoder and the refund-trace steps under Form 3911.
Look up the 3-year refund deadline in The IRS Refund Recovery Kit.
This article was researched and drafted with the assistance of AI and reviewed by an editor.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
