What IRS Form 1127 (2010) Is For
IRS Form 1127 (2010) is an official tax form from the Internal Revenue Service designed for taxpayers facing significant financial difficulties who cannot pay taxes owed by the standard due date. This application for extension provides temporary relief by granting additional time for payment of tax due without immediate penalties. It applies to certain taxes such as income tax, excise taxes, and generation-skipping transfer taxes. The IRS evaluates each submission to determine whether the taxpayer qualifies for an extension based on undue hardship or severe financial hardship.
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When You’d Use IRS Form 1127 (2010)
Taxpayers use this form when paying taxes by the standard due date would result in severe financial hardship or substantial loss.
- Before filing your tax return, individual taxpayers may request additional time to pay their tax liability if immediate payment would cause significant financial strain or require the sale of property at a loss.
- Post-IRS audit or deficiency notice: File IRS Form 1127 to postpone payment of taxes owed following an audit where the IRS determines additional taxes are due.
- Facing short-term financial difficulties: Taxpayers facing temporary challenges can use this form to request a delay in tax payments until they have gathered the funds to pay the amount owed in full.
- Not suitable for long-term payment needs: If you require an extended time to pay, the IRS offers an installment agreement or a long-term payment plan to spread the costs over a longer period.
If you need a longer-term solution, consider applying for an IRS payment plan to pay off your tax liability over time.
Key Rules or Details for the 2010 Tax Year
The 2010 version of IRS Form 1127 contains several essential rules that taxpayers must follow to qualify for an extension of time for payment.
- Extension period: Most individual taxpayers may receive up to six months for tax shown on the return or up to eighteen months for a deficiency, depending on their financial situation and supporting evidence.
- Interest charges apply: Even if the IRS grants an extension, interest continues to accrue on unpaid taxes from the original filing deadline until the full payment is made.
- Penalty relief conditions: Penalties may be waived if the IRS approves the request and the taxpayer meets all payment conditions by the extended deadline.
- Required documentation: The IRS requires detailed financial information, including a statement of assets and liabilities, as well as a record of income and expenses for the three months preceding the filing deadline.
- Where to file: Mail the completed form to the appropriate address listed on the IRS website, usually the local Advisory Group or the Cincinnati Service Center for gift or excise taxes.
For taxpayers who qualify, IRS penalty abatement may be available to reduce or remove certain penalties associated with late payments.
Step-by-Step (High Level)
Filing IRS Form 1127 (2010) involves several clear steps that ensure proper documentation and timely submission.
- Step 1: Gather financial documentation: Collect bank statements, property valuations, and income records that demonstrate your financial hardship and inability to pay taxes immediately.
- Step 2: Complete the form accurately: Enter the tax year, type of tax, and total tax owed, clearly identifying whether the request is for income tax, excise taxes, or another applicable tax.
- Step 3: Explain your hardship: Provide a detailed explanation of how immediate payment would cause undue hardship, specifying the financial losses or forced sales that would occur.
- Step 4: Attach required schedules: Include a complete statement of assets and liabilities, as well as an itemized record of income and expenses for the previous three months.
- Step 5: Sign and submit: Ensure the form is signed and mailed to the appropriate IRS Advisory Group Manager before the payment due date listed on your tax return.
- Step 6: Monitor your application: The IRS reviews your application on a case-by-case basis and will notify you in writing if the extension is approved or denied.
If your application is denied and you’re unable to pay, an IRS Offer in Compromise could provide a pathway to settle your debt for less than the full amount owed.
Common Mistakes and How to Avoid Them
Avoiding common filing errors helps ensure that the IRS reviews your application promptly and without delay.
- Confusing Form 1127 with filing extensions: IRS Form 1127 only delays tax payments; it does not extend the time to file your tax return. Use the proper filing extension form if you need more time to submit your return.
- Incomplete financial documentation: Failing to include all required statements of assets, liabilities, income, and expenses will result in your request being returned as incomplete.
- Vague hardship explanations: General statements such as “I can’t afford to pay” are not sufficient; provide a detailed explanation showing the specific financial hardship and its impact.
- Late submission: The IRS must receive the form by your payment due date; late submissions are automatically denied, regardless of your circumstances.
- Ignoring interest and penalties: Even if an extension is approved, interest will continue to accrue. Plan your payment schedule carefully to minimize additional costs.
- Using the form for ineligible taxes: IRS Form 1127 is not for estate tax or ongoing payment issues; in such cases, apply for a short-term payment plan or installment agreement instead.
If you also have unfiled federal income tax returns, it’s important to address those immediately to avoid further penalties.
What Happens After You File
Once your IRS Form 1127 is submitted, the Internal Revenue Service reviews the application and supporting documents to determine eligibility. If the IRS approves your request, you will receive a written notice specifying the new payment deadline. Interest continues to accrue until your tax obligation is paid in full. If the IRS denies your request, you must pay your tax liability immediately or consider other payment options, such as an installment agreement.
Applications that are incomplete or contain errors may be returned without review, which could result in a delay of any potential relief. Each case is evaluated individually, and only taxpayers facing genuine financial hardships are granted an extension.
FAQs
Can I submit IRS Form 1127 after my payment deadline?
No, the IRS must receive IRS Form 1127 by the original payment deadline stated on your tax return. Once that date passes, you should consider alternative payment options, such as an installment agreement or a penalty relief program.
Does approval of IRS Form 1127 stop interest?
No, interest continues to accrue on unpaid taxes until full payment is made, even when the IRS grants an extension of time for payment. Taxpayers should plan to minimize the total amount owed.
What proof of financial hardship is required?
The IRS requires detailed financial information, including a statement of assets, liabilities, and income. This documentation must show that immediate payment would cause significant financial hardship or undue hardship.
Can IRS Form 1127 be filed electronically?
As of the 2010 tax year, the form must be printed, signed, and mailed to the appropriate IRS office. Taxpayers should check the IRS website for current electronic filing options, as these may be subject to change.
Does applying for Form 1127 affect my credit?
Filing IRS Form 1127 does not appear on credit reports. However, failing to pay taxes by the extended due date may result in penalties or tax liens that could negatively impact your credit standing.
