The ASFR Unit: When the IRS Files a Return For You (and Freezes Your Refund)

Most taxpayers assume that if they skip filing for a year, the worst consequence is a late-filing penalty. In reality, failing to file can trigger one of the most aggressive automated actions the IRS uses: an IRS-created tax return.

This process is handled by the Automated Substitute for Return (ASFR) Unit.

Understanding the Automated Substitute for Return ASFR process explains why some taxpayers suddenly lose an entire refund—even when their current-year return is accurate and timely.

What Is an Automated Substitute for Return (ASFR)?

An ASFR is a tax return the IRS creates on your behalf when you fail to file a required return.

The IRS builds this return using:

• W-2 wage data
• 1099 income information
• Third-party payer records

Critically, the ASFR does not include:

• Deductions
• Credits
• Filing status optimization

The result is almost always a high balance due.

Why the ASFR Unit Exists

The ASFR Unit is designed to:

• Enforce filing compliance
• Establish a legal tax assessment
• Create a collectible balance due

Once assessed, the IRS can legally pursue payment—even if you never filed a return yourself.

How an ASFR Freezes a Future Refund

When an ASFR balance exists:

• The IRS treats it as a legally assessed debt
• Any future refund is automatically seized
• The offset occurs before you ever see the money

This is why a 2026 refund can vanish instantly if a prior-year ASFR is on file.

How ASFR Activity Appears on Transcripts

On an Account Transcript, ASFR activity often includes:

• A return filed by IRS indicator
• Assessment transaction codes
• A balance due with penalties and interest

Many taxpayers only discover an ASFR after their refund disappears.

Why ASFR Returns Are Almost Always Wrong

Because the IRS lacks full information, ASFR returns:

• Assume the worst filing status
• Ignore deductions and credits
• Overstate tax liability

In many cases, taxpayers are owed a refund for the ASFR year—but cannot claim it until they replace the IRS version.

What Happens Next?

To release a seized refund and fix the issue, the taxpayer must:

1. File the original missing return for the ASFR year
2. Replace the IRS-created return with accurate data
3. Trigger a TC 291 adjustment to reduce or eliminate the assessed tax

Once the ASFR is replaced:

• The balance due is recalculated
• Refund offsets stop
• Current-year refunds can be released

Why Filing the Missing Return Is the Only Solution

Paying the ASFR balance without filing the return:

• Does not correct the tax record
• May result in overpayment
• Leaves credits unclaimed

The IRS recognizes only one way to reverse an ASFR: file the real return.

What You Should and Should Not Do

You Should:

• Check transcripts for ASFR indicators
• File missing returns as soon as possible
• Address ASFR years before expecting refunds

You Should Not:

• Ignore prior-year filing gaps
• Assume refunds will bypass ASFR debts
• File amended returns for years you never filed

The Automated Substitute for Return ASFR process is not theoretical—it actively seizes refunds every year.

If the IRS filed a return for you:

• Your balance due is legally enforceable
• Your refund can be taken instantly
• Filing the missing return is the only fix

Resolving ASFR issues before filing future returns is the difference between receiving your refund—or watching it disappear.