If the IRS filed Substitute-for-Returns on my client, do I need to file the actual returns before submitting an Offer?

No, you do not. A Substitute-For-Return (\”SFR\”) is a tax return put together by the IRS either from third party sources or from information it obtains from the taxpayer (usually under an administrative summons). That SFR is a tax return that is good for all purposes. The government can file a lien or levy based upon the SFR, and the SFR starts the running of the ten-year collection statute. Taxpayers can also just pay the balance on the SFR, can request an installment agreement to pay it, or compromise it away.
The one rule about a substitute for return that a taxpayer cannot ignore is that if the return is put together by information submitted to the IRS by the taxpayer, the taxpayer cannot rely on the SFR to avoid fraud charges if he or she withheld information or intentionally provided false information.