Form 1127 (2010): Application Checklist: Extension of Time for Payment of Tax Due to Undue Hardship
Purpose of Form 1127
Form 1127 allows taxpayers to request an extension of time to pay income, self-employment, withheld, private foundation, qualified investment entity, greenmail, structured settlement factoring, or gift taxes when immediate payment would cause undue hardship. Undue hardship means more than mere inconvenience—it requires demonstrating that paying the tax on the due date would result in a substantial financial loss, such as being forced to sell property at a significantly reduced price.
Step-by-Step Completion Guide
Step 1: Verify Eligibility Using the Determination Chart
Verify that Form 1127 is the correct form for your specific situation. Do not use Form 1127 if you are seeking a filing extension (use Form 4868 or Form 2350), requesting a monthly installment plan (use Form 9465), or seeking an estate or generation-skipping transfer tax extension (use Form 4768). Form 1127 applies only to payment extensions for tax shown on returns or amounts determined as deficiencies.
Step 2: Provide Complete Identifying Information
Enter your name, address, and Social Security Number or Individual Taxpayer Identification Number exactly as shown on your underlying tax return. For joint returns or joint deficiency liability, include both spouses’ names in the order they appear on the return, with the first spouse’s identifying number in the designated field. Businesses should enter their company name, address, and Employer Identification Number.
Step 3: Complete Part I – Request for Extension
Enter the due date of your return (not including any filing extensions) or the deficiency payment due date shown on your tax bill. Indicate whether the tax year is a calendar year or a fiscal year, and if fiscal, provide the ending month, day, and year. State the amount of tax you owe and propose a payment date within allowable extension periods.
Step 4: Establish Undue Hardship in Part II
Provide a detailed, factual explanation demonstrating that paying the tax by the due date would cause substantial financial loss. General statements of hardship are insufficient. Explain specific circumstances such as forced asset sales at sacrifice prices, loss of business operations, or other concrete financial harm that exceeds mere inconvenience. Attach additional sheets if necessary.
Step 5: Determine Your Proposed Payment Date
For tax shown on a return, propose a payment date no later than six months from the return due date (excluding filing extensions). If you are out of the country, you may request more than six months. For deficiencies, please propose a date that is up to 18 months from the payment due date shown on your tax bill. In exceptional circumstances, an additional 12 months may be requested for deficiencies.
Step 6: Prepare Asset and Liability Statement
Prepare a detailed statement of your assets and liabilities at the end of the last month before filing. Include both book values and current market values for all assets. Clearly indicate whether securities are listed or unlisted. This statement must be attached to your application.
Step 7: Compile Three-Month Income and Expense Records
Create an itemized list of all income and expenses for each of the three months immediately before the tax due date. Provide specific details rather than general categories. This documentation must be attached to support your hardship claim.
Step 8: Select the Correct Tax Form in Part II
Check only one box indicating whether your request relates to the tax shown on a return or an amount determined as a deficiency. Enter the corresponding form number (such as Form 1040, Form 1041, Form 1120, or Form 709) to which the tax relates.
Step 9: Certify Supporting Documentation in Part III
Check both certification boxes in Part III to confirm that you have attached the required asset and liability statement and the itemized three-month income and expense list. Your application will not be processed without these attachments and certifications.
Step 10: Execute Signatures Properly
Sign and date the form yourself. If the application relates to a joint return or joint deficiency liability, your spouse must also sign and date the form. If your spouse cannot sign, refer to IRS Publication 501 for guidance. If a tax professional prepared the form, that preparer must also sign and date it.
Step 11: Submit Before the Deadline
If you are requesting an extension for the tax shown on a return, file Form 1127 and all supporting documentation on or before the return due date (not including filing extensions). Suppose you are requesting an extension for a deficiency filed by the payment due date stated on your tax bill. Late applications cannot be accepted.
Step 12: Send to the Correct IRS Address
Mail Form 1127 to the Internal Revenue Service Collection Advisory Group Manager for your area of legal residence or principal place of business. Consult IRS Publication 4235 for contact information for the Collection Advisory Offices. Exception: If the tax is a gift tax reportable on Form 709 or Form 709-NA, send your Form 1127 to the Department of the Treasury, Internal Revenue Service, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.
Special Considerations for Specific Tax Types
Gift Tax Extensions
Applications for extensions related to gift tax on Forms 709 or 709-NA must be sent to the dedicated Florence, Kentucky, address rather than your local Collection Advisory Group. Verify the correct mailing address before submission.
Out-of-Country Taxpayers
If you are outside the United States when your tax is due, you may qualify for extensions exceeding six months for the tax shown on a return. Clearly document your out-of-country status in your hardship explanation.
Exceptional Circumstances for Deficiencies
While deficiency extensions are generally limited to 18 months, you may request an additional 12 months in exceptional circumstances. Clearly explain why your situation qualifies as unique and provide supporting documentation to substantiate your claim.
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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.
