What IRS Form 1127 (2015) Is For
IRS Form 1127 (2015) allows taxpayers to request an extension of time for payment of tax due when paying by the deadline would cause severe financial hardship. It is used to delay the payment of individual income tax returns, estate tax, or other federal taxes when immediate payment would result in a substantial economic loss. This application for extension is granted only in cases where the Internal Revenue Service (IRS) determines that payment would cause undue hardship based on detailed financial information provided by the taxpayer.
For more IRS tax form resources and answers to common questions, visit our IRS Form Help Center.
When You’d Use IRS Form 1127 (2015)
Taxpayers who use this form when paying taxes on time would create significant financial difficulties.
- Owe taxes on a filed return: You can file IRS Form 1127 (2015) to request an extension of time to pay taxes shown on your return when immediate payment would result in undue hardship or force the sale of assets below their market value.
- Receive a tax bill after an audit: If the IRS determines that you owe additional taxes after reviewing your return, you can request an extension of time for payment of tax due before the payment deadline expires.
- Avoid selling assets at a loss: When paying taxes would require liquidating investments or property at a significant loss, the IRS may consider this as proof of financial hardship.
- Face short-term financial hardship: Taxpayers experiencing temporary cash flow issues due to medical emergencies, loss of income, or unexpected expenses may request an extension until they can gather the necessary funds to pay.
If your extension request is denied or you need more time, an IRS payment plan could help you pay your taxes over a longer period.
Key Rules or Details for the 2015 Tax Year
Before filing IRS Form 1127 (2015), taxpayers should understand the essential rules and limitations established by the Internal Revenue Service for that tax year.
- Extension period limits: The IRS generally grants extensions of up to six months for taxes shown on a return and up to eighteen months for deficiency amounts, with a possible twelve-month extension in exceptional circumstances.
- Proof of undue hardship: The IRS will only approve requests showing that paying taxes on time would cause more than inconvenience; you must prove that immediate payment would result in substantial financial loss or hardship.
- Mandatory financial documentation: The form requires a complete statement of assets, tax liability, income, and expenses for the three months preceding the due date to verify the taxpayer’s financial situation.
- Interest continues to accrue: Even if the IRS grants the extension, interest will continue to accrue from the original due date until the full tax owed is paid.
- Penalties and ineligibility: The IRS may deny applications that lack documentation or involve negligence, fraud, or repeated noncompliance with tax obligations.
If you are assessed penalties because of payment delays, you may qualify for IRS penalty abatement.
Step-by-Step (High Level)
The process of filing IRS Form 1127 (2015) involves preparing detailed records, completing the form accurately, and submitting it before the payment deadline.
- Gather financial documents: Collect current financial records, including bank statements, income reports, property valuations, and any documentation supporting your claim of economic hardship.
- Complete the form accurately: Indicate the type of tax you owe, such as income, estate, or gift tax, and include the correct tax year, form number, and amount of tax shown or due.
- Provide a detailed explanation: Explain in clear terms how paying taxes by the due date would cause financial hardship, such as requiring you to sell assets below market value or affecting essential living expenses.
- Attach required documentation: Include both a statement of assets and liabilities and a three-month summary of income and expenses to support your request.
- Sign and submit to the correct office: Ensure that all required signatures are provided, and mail the completed form and attachments to the address listed in the IRS instructions.
- Keep copies for your records: Retain copies of your application, and use certified mail or electronic confirmation to verify timely submission to the IRS.
For taxpayers unable to pay their full debt, an IRS Offer in Compromise may offer a way to settle for less than the full amount owed.
Common Mistakes and How to Avoid Them
Taxpayers often make errors when filing IRS Form 1127 (2015), which can lead to denial or delays in approval. Understanding these mistakes helps improve your chances of success.
- Failing to prove genuine hardship: The most common mistake is submitting vague claims of financial difficulties without supporting documentation. You should include evidence such as income statements, appraisals, or medical bills to demonstrate why immediate payment would cause undue hardship.
- Omitting required financial information: Applications are often rejected when taxpayers fail to attach detailed financial records; always include a complete list of assets, liabilities, and a three-month income and expense summary.
- Filing too close to or after the due date: Late submissions are automatically denied; you should file several weeks before the payment deadline to give the IRS time to review your request.
- Requesting more time than necessary: Asking for an excessive extension can raise concerns; always request a realistic period that reflects when you can reasonably pay the tax owed.
- Using the wrong form: Many taxpayers confuse Form 1127 with Form 4868 or Form 9465; remember, Form 1127 applies only to an extension of time for payment, not filing or installment agreements.
- Ignoring interest charges: Some taxpayers overlook that interest continues to accrue even if an extension is granted; you should calculate estimated interest beforehand and plan accordingly.
What Happens After You File IRS Form 1127 (2015)
Once you file IRS Form 1127 (2015), the IRS reviews your request and supporting documentation on a case-by-case basis. If the IRS approves your application, you will receive written confirmation stating your new payment deadline and any conditions attached, such as providing collateral for significant liabilities. Interest will continue to accrue until the tax is fully paid. If the request is denied, you must pay the tax owed immediately or contact the IRS to establish an installment agreement or payment plan. Staying in communication with the IRS and monitoring deadlines helps prevent additional penalties or collection actions.
If you have unfiled federal income tax returns, address them as soon as possible to prevent further penalties.
FAQs
Can I get more time to pay taxes using IRS Form 1127 (2015)?
Yes, the IRS may grant an extension of time to pay taxes if paying by the original due date would cause undue hardship. You must prove your financial situation meets the criteria under federal tax laws to qualify for this temporary relief.
What qualifies as undue hardship for an extension of time?
Undue hardship means that paying your tax debt by the deadline would cause a substantial financial loss, such as selling property at below-market value. The IRS reviews each case individually based on detailed financial documentation and other factors related to your tax payments.
Can I apply for a long-term payment plan instead of Form 1127?
Yes, if your financial hardship is ongoing, you can request a long-term payment plan or installment agreement to resolve your tax debt gradually. This option may be better suited when you are unable to meet your tax payment obligations within a few months.
What happens if I miss the payment deadline due to undue hardship?
If you miss your payment deadline, you may face penalties and interest under federal tax laws. It is best to contact the IRS immediately to discuss other payment arrangements or apply for an installment agreement to manage your tax debt effectively.
