The Minnesota Department of Revenue may file a Commissioner Filed Return (CFR) if a taxpayer fails to file a tax return on time. If the taxpayer has not filed within 30 days of the due date, the department prepares a CFR based on an estimated tax amount. This is a valid assessment.
A CFR does not satisfy the taxpayer’s obligation to file a return. Unfiled returns and unpaid tax make a taxpayer subject to criminal penalties. View the statute, Minnesota Statutes, section 289A.63
Types of Notification of Commissioner Filed Returns
If a business has an unfiled Withholding Tax or Sales and Use Tax return, the department sends a Demand to File letter. The department will not contact a business by phone about unfiled returns.
The missing return must be filed by the deadline in the letter, or the department may prepare a CFR. The business may later file an original return to replace the CFR.
Before the department begins the collection process on an unfiled individual income tax return, two letters are usually sent:
- Request for Unfiled Returns. This letter states that based on information from the IRS, the department has reason to believe a Minnesota tax return should have been filed. The taxpayer has 30 days to respond to the letter in one of the following ways:
- Prove that a return was already filed.
- Show that the taxpayer is not required to file the return.
- File the return.
- Notification of Assessment. This letter notifies the taxpayer that the department has prepared a Minnesota tax return based on available information. It explains how the department calculated the tax and provides a breakdown of the tax, penalties and interest. The debtor has 60 days to pay the amount due or appeal the assessment.
Instead of filing a CFR, a department auditor may prepare a Tax Order
based on actual figures. The table below compares these two types of assessments.
|M.S. 270C.33, subd 3
||M.S. 270C.33 subd. 4|
|Tax amount based on estimated figures. Prepared only by the taxing divisions.
||Tax amount based on actual figures. Prepared by department auditors. Order must explain the basis of assessment.|
|Two CFR letters give taxpayer 60 days to pay, file an original return, or appeal to Tax Court. After the appeal period, a "demand to pay" letter is sent.
||Assessment letter gives 60 days to appeal or pay. After the appeal period, a 30 day "demand to pay" letter is sent.|
|No enforced collection action for 30 days unless a "jeopardy situation" exists. No collection action is taken if debtor is in bankruptcy.
||No collection action, including lien filing, during the appeal period unless a "jeopardy situation" exists.|
|No administrative appeal period, but the debtor may appeal directly to Tax Court within 60 days of the assessment letter.
||During the 60 day appeal period, the debtor may ask for an administrative review or appeal directly to Tax Court. If an administrative appeal is denied, the debtor has another 60 days to appeal to Tax Court. If the case is in Tax Court, no collection action can be taken until the court issues a final decision.|
|The department must accept the debtor's own figures to replace a CFR with no time limit.
||The debtor can appeal the assessment and provide substantiation within the appeal period only.|
Time Limits for Refund Claims on a Commissioner Filed Return or Tax Order
A CFR can be replaced at any time, even if the debt assessed is paid in full. However, there is a time limit on the refund claim if the amount paid is higher than the resulting tax amount due.
A refund claim must be filed within one year of the assessment date or within 3½ years of the original return due date, whichever is later. Beyond that limit, a refund cannot be claimed. View the statute, M.S. 289A.40, subd.1.