Form 1127 (Rev. 12-2020) — 2020 Tax Year Checklist
Purpose
Form 1127 requests extension of payment time under IRC §6161 for income, self-employment, gift, or deficiency taxes when paying by the due date would cause substantial financial loss. The 2020 revision updated the gift tax filing address to Florence, Kentucky, reflecting administrative consolidation at the IRS processing center.
This form does NOT extend the time to file your return—only the time to pay the tax owed. If you need more time to file, use Form 4868 for individual income tax returns or Form 2350 for taxpayers abroad. Form 1127 is designed explicitly for payment extensions due to undue hardship.
Preparation Step
1. Confirm Form 1127 is the Correct Vehicle
Verify that you are seeking a payment extension (not a filing extension) and that you have identified a specific undue hardship—not mere inconvenience or preference to preserve liquidity.
Undue hardship means more than inconvenience. You must demonstrate that paying the tax on the due date will cause you substantial financial loss, such as forced sale of property at a sacrifice price below fair market value, significant business disruption or operational damage, liquidation penalties or losses on investments, or other quantifiable financial harm beyond temporary cash flow concerns.
Generic statements like “I don’t have the money” or “it would be difficult” are insufficient. The IRS requires concrete evidence of substantial financial loss.
2. Determine Tax Type and Related Form
Identify the specific tax type and corresponding form number: income taxes (Form 1040, 1120, etc.), self-employment taxes, gift tax (Form 709), or deficiency notice (amount owed after IRS examination).
Enter the exact form number in Part I of Form 1127. Do NOT file Form 1127 if you are requesting a monthly installment payment plan—use Form 9465 instead. Form 1127 is for a one-time extended payment deadline, not ongoing installment arrangements.
3. Calculate Extension Window
For tax shown on a return:
General taxes (income, self-employment, etc.): Maximum 6 months from the original due date. This 6-month limit may be exceeded if you are a taxpayer residing abroad (outside the United States).
Estate tax: Maximum 12 months from the original due date, regardless of whether you are in the country or abroad. The estate tax already has its own statutory 12-month limit under IRC §6161(a)(1).
For deficiency (amount determined after IRS examination):
Maximum 18 months from the payment due date shown on your IRS notice or bill. In exceptional circumstances, an additional 12 months may be granted (total of 30 months). Extensions will NOT be granted if the deficiency resulted from negligence, intentional disregard of rules and regulations, or fraud with intent to evade tax.
4. Assemble Required Supporting Documents
You must attach BOTH of the following documents, or your application will be rejected:
Document 1: Statement of Assets and Liabilities
Prepare a complete statement as of the end of the last month preceding the tax due date. This statement must clearly display all assets, including both book value and fair market value, and indicate whether securities are listed (publicly traded) or unlisted. It should also include all liabilities and debts, as well as a detailed calculation of net worth.
Document 2: Itemized Income and Expenses
Provide an itemized list covering exactly three consecutive months immediately before the tax due date. List all sources of income by category for each month, itemize all expenses by category for each month, and include all three months—partial months or alternative periods are not accepted.
These documents must demonstrate your financial condition and support your claim of undue hardship. Incomplete documentation will result in the denial of your application.
5. Draft Detailed Hardship Narrative in Part II
In Part II of Form 1127, provide a detailed explanation of the specific substantial financial loss you will suffer if forced to pay on the due date. Your narrative should describe the exact nature of the economic harm, quantify the loss with dollar amounts or percentages, explain why payment would require selling assets at below-market prices, detail any business operations that would be disrupted, and provide specific facts, not general statements.
Generic hardship statements such as “I cannot afford to pay” or “it would be difficult” will be insufficient for approval. If the space provided in Part II is inadequate, attach a separate sheet with your detailed explanation.
6. Obtain Required Signatures
Individual taxpayers must sign and date Form 1127 in Part III. For joint returns or joint deficiency liability, both spouses must sign and date the form. Under the 2020 rules, one spouse cannot sign alone without proper authority documentation. If your spouse is unable to sign, see Publication 501, Dependents, Standard Deduction, and Filing Information, for guidance on signing authority and exceptions. Corporate taxpayers require a signature from an authorized officer.
Incomplete signature blocks will cause rejection and delay your application. Ensure all signatures and dates are present before mailing.
7. Route to Correct Address
For gift tax (Form 709) ONLY:
Mail your Form 1127 to the updated 2020 address: Department of the Treasury, Internal Revenue Service, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.
For all other taxes:
File Form 1127 with the Internal Revenue Service (Attn: Advisory Group Manager) for the Collection Advisory Group area where you maintain your legal residence or principal place of business. See Publication 4235, Collection Advisory Offices Contact Information, to find the correct address for your local advisory group based on your location.
8. Verify Completeness Before Mailing
Before submitting Form 1127, confirm all signatures and dates are present in Part III, both required supporting documents are attached (assets/liabilities statement and 3-month income/expense list), Part I correctly identifies the tax type and form number, Part II contains a detailed hardship explanation with specific facts, you are mailing to the correct address for your tax type, and the form is filed on or before the due date (for return tax) or payment due date (for deficiency).
Incomplete applications will be rejected, causing delays and potential penalties.
YEAR-SPECIFIC UPDATES & REGULATORY CHANGES
Gift Tax Filing Address Change (2020)
The December 2020 revision of Form 1127 updated the filing address for gift tax extensions. All Form 1127 applications related to gift tax reportable on Form 709 now route to the Florence, Kentucky consolidated processing center instead of prior regional addresses. This administrative change centralizes gift tax payment extension processing at a single IRS facility.
Undue Hardship Definition Clarified
The 2020 instructions emphasize that undue hardship necessitates a demonstration of substantial financial loss, rather than mere inconvenience or a preference to preserve investments. Claims must be supported by quantified asset/liability statements and income/expense documentation covering the required 3-month period. No hardship extension will be granted based solely on liquidity preference or general statements of financial difficulty.
Deficiency Extension Limits Reaffirmed
The 18-month maximum limit for deficiency payment extensions (with a possible additional 12 months in exceptional circumstances) applies regardless of COVID-19 relief discussions during 2020. No blanket pandemic deferral replaced this standard statutory limit under IRC §6161(b)(1). Taxpayers seeking payment relief due to pandemic-related hardship must still demonstrate undue hardship through the standard Form 1127 application process.
IMPORTANT REMINDERS
Interest accrues on any unpaid tax from the original due date until the tax is paid in full, even if an extension is granted. Failure to pay within the extended period may result in additional penalties. If your extension is approved, you must pay the tax before the extension expires—do not wait to receive a bill from the IRS. Filing Form 1127 does not guarantee approval. The IRS will review your application and supporting documentation to determine whether undue hardship exists.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
