What IRS Form 1127 (2012) Is For
IRS Form 1127 (2012) allows taxpayers facing financial hardships to request extra time to pay their taxes when immediate payment would cause significant economic difficulties. The Internal Revenue Service reviews these applications on a case-by-case basis to determine if an extension of time should be granted for meeting tax obligations. This tax form applies to specific tax types such as income, self-employment, and estate tax. It provides short-term relief to taxpayers who cannot pay taxes owed without selling assets, using savings needed for reasonable living expenses, or disrupting their financial stability.
For additional guidance on tax forms and payment relief, visit our IRS Form Help Center
When You’d Use IRS Form 1127 (2012)
Taxpayers may use this form when paying taxes on time would cause undue hardship or result in a substantial financial loss.
- Before filing your tax return: Submit IRS Form 1127 if your financial situation makes it impossible to meet the payment deadline without causing severe economic hardship.
- After receiving a tax bill or deficiency notice: File this form if the IRS determines additional taxes are owed, and you cannot make immediate payment without jeopardizing your financial obligations.
- Tax period for back taxes: Use Form 1127 to request additional time when paying back taxes would endanger your reasonable living expenses or essential needs.
- Specific tax liabilities: These include income, self-employment, gift, or estate tax payments that would create financial strain if paid immediately.
If your application is denied or you need more time, an IRS payment plan may allow you to pay your tax debt in manageable installments.
Key Rules or Details for the 2012 Tax Year
Understanding the specific rules for the 2012 tax year helps taxpayers ensure they meet eligibility requirements before filing IRS Form 1127 (2012).
- Extension limits: The IRS typically grants up to six months for taxes shown on the return and up to eighteen months for tax deficiencies, with longer extensions possible for taxpayers living abroad.
- Interest charges: Interest continues to accrue on unpaid taxes from the original due date until full payment is made, even if the IRS grants an extension of time to pay.
- Penalty relief: The IRS may waive late payment penalties if the taxpayer pays the full amount within the approved extension period.
- Eligibility criteria: Taxpayers must demonstrate undue hardship by submitting detailed financial information, including assets, liabilities, income, and reasonable living expenses.
- Restrictions: The IRS does not approve extensions for tax liabilities resulting from negligence, intentional disregard of tax laws, or fraud.
- Supporting documents: Applicants must include a collection of information statements and an income and expense summary for the three months preceding the filing deadline.
If you incur penalties because of missed payments, you may be eligible for IRS penalty abatement.
Step-by-Step (High Level)
Following these structured steps ensures that taxpayers complete IRS Form 1127 (2012) accurately and improve their chances of approval.
- Confirm eligibility: Review the IRS instructions provided with the form to ensure your financial hardship meets the eligibility criteria for an extension.
- Gather financial records: Prepare a complete statement of all assets, liabilities, and reasonable living expenses, including current bank account balances and other economic data.
- Complete the tax form accurately: Include the correct amount of tax owed, indicate your tax year and filing status, and specify the related tax form, such as Form 1040.
- Provide a detailed explanation: Clearly describe why immediate payment would cause significant financial hardship or force you to liquidate assets at unfavorable prices.
- Attach supporting documents: Include all required financial statements and income and expense reports to validate your hardship claim.
- Mail to the appropriate address: Send your completed application to the IRS Advisory Group or office assigned to your location, following the address list in the IRS instructions.
- Continue making partial payments: Make partial or monthly payments toward your tax obligation while the IRS reviews your application to reduce interest charges and show good faith.
If paying your tax debt in full isn’t possible, consider applying for an IRS Offer in Compromise to potentially settle for less.
Common Mistakes and How to Avoid Them
Avoiding these common errors helps taxpayers improve their chances of approval and prevent penalties when submitting IRS Form 1127 (2012).
- Confusing payment extensions with filing extensions: This form only provides extra time to pay taxes owed and does not extend the tax return filing deadline, so always file your return on time.
- Providing vague hardship explanations: Clearly describe how paying immediately would cause financial hardship, such as selling assets below market value or failing to meet living expenses.
- Submitting incomplete documentation: Ensure all supporting documents are attached, including a complete list of assets, liabilities, income, and expenses, to avoid delays or rejection.
- Filing after the payment deadline: The IRS automatically rejects late applications, so always submit the form before your due date.
- Assuming automatic approval: The IRS reviews each application individually and may deny requests; always prepare a backup payment arrangement or installment plan.
- Ignoring payments during review: Continue making partial payments while waiting for the IRS decision to reduce interest charges and show a reasonable faith effort.
- Missing the extended deadline: Failing to pay by the new due date reinstates penalties and may trigger IRS collection efforts.
What Happens After You File IRS Form 1127 (2012)
After submitting IRS Form 1127 (2012), the IRS reviews your financial documentation and hardship explanation to determine eligibility for an extension. If approved, the agency grants you additional time to pay your tax debt, although interest continues to accrue during the extended period.
If denied, you may be eligible to apply for an installment agreement, a long-term payment plan, or CNC status, depending on your financial situation. The IRS may also request additional documents during review. Continue to monitor your account and make payments to avoid further penalties or collection actions. If you also have unfiled federal income tax returns, address those as soon as possible to prevent additional penalties.
FAQs
What taxes qualify for IRS Form 1127 (2012)?
IRS Form 1127 (2012) applies to specific tax liabilities, including income tax, self-employment tax, gift tax, and estate tax. It is designed for taxpayers facing financial hardships who need additional time to pay taxes owed without selling essential assets or compromising reasonable living expenses.
Does approval stop IRS collection actions?
An approved payment extension may temporarily delay IRS collection efforts during the granted period, provided the taxpayer continues to meet all payment terms and maintains communication with the IRS.
Can individual taxpayers use IRS Form 1127 (2012) instead of an installment agreement?
Yes, but it depends on the taxpayer’s financial situation. The IRS grants an extension only when immediate payment would create undue hardship, while an installment agreement is for those who can make monthly payments.
What happens if the IRS denies the extension?
If the IRS denies the request, the taxpayer may seek alternative payment options, such as an installment agreement, long-term payment plan, or CNC status, to temporarily delay collection. Consulting a tax professional can help determine the best alternative.
