What IRS Form 1127 (2013) Is For
IRS Form 1127 (2013) is an official document from the Internal Revenue Service that allows taxpayers facing genuine financial hardship to request an extension of time for paying the tax due. It provides temporary relief to those unable to make immediate payment of their tax liabilities without incurring substantial financial loss. This form applies to several types of taxes, including income tax, self-employment tax, estate tax, and gift taxes.
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When You’d Use IRS Form 1127 (2013)
Taxpayers should use IRS Form 1127 (2013) when paying taxes on time would cause substantial financial loss or create significant economic hardship.
- Upcoming Return Payment: This form is used when a taxpayer cannot pay the full amount of federal taxes shown on their return, such as Form 1040, by the filing deadline without experiencing significant financial difficulties.
- IRS Determined Deficiency: This applies when the IRS reviews a tax return and issues a tax bill showing an additional outstanding tax amount that cannot be paid immediately without causing undue hardship.
- Financial Hardship Situations: Taxpayers facing financial hardships may file Form 1127 when paying taxes would require selling assets at below-market value or would otherwise result in a substantial financial loss.
- Before Payment Deadline: Form 1127 must be submitted on or before the due date listed on the tax bill to be considered for an extension of time to pay.
- Alternative Options: If the payment deadline has already passed, taxpayers should contact the IRS to discuss available payment arrangements, such as installment agreements or currently not collectible status.
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Key Rules or Details for 2013
Specific eligibility criteria and time limits applied to IRS Form 1127 (2013), and understanding them helps taxpayers meet the requirements before filing.
- Definition of Undue Hardship: Taxpayers must demonstrate that immediate payment would cause substantial financial loss or force the sale of assets at a sacrifice price that is significantly below fair market value.
- Extension Period Limits: The IRS generally grants an extension of up to six months for taxes shown on a return or up to eighteen months for deficiency tax liabilities, with the possibility of a twelve-month extension in exceptional cases.
- No Relief for Fraud or Negligence: Taxpayers whose tax liability resulted from fraud, intentional misrepresentation, or negligence are not eligible to request an extension under Form 1127.
- Interest Accrues During the Extension: Interest charges continue to apply on unpaid taxes even when an extension is granted, calculated at the federal short-term interest rate plus three percentage points.
- Penalties After the Extended Deadline: If payment is not made by the extended due date, late payment penalties and additional interest will be assessed until the tax liability is fully satisfied.
If penalties are assessed for late payments, you may be eligible for IRS penalty abatement.
Step-by-Step (High Level)
Filing IRS Form 1120 (2013) requires organization, accuracy, and complete transparency of your financial situation.
- Collect Financial Records: Gather detailed financial information, including bank statements, monthly income, expenses, and financial statements that show your assets and liabilities.
- Complete Identifying Information: Provide accurate personal details such as your full name, mailing address, and employer identification number (EIN) or Social Security number as it appears on your tax return.
- Specify the Type of Tax Payment Extension: Indicate whether the extension applies to an income tax return or a deficiency determined by the IRS after review.
- Explain the Hardship: Include a detailed explanation describing how immediate payment would cause undue hardship, supported by factual financial evidence.
- Attach Supporting Documentation: Submit all relevant evidence, such as an itemized list of income and expenses for the past three months and a statement of your assets and liabilities.
- Sign and File the Form: Sign and date the completed Form 1127, then mail it to the appropriate address provided in IRS Publication 4235 based on your location or business address.
If you cannot pay after an extension denial, you may qualify for an IRS Offer in Compromise to settle your tax debt for less.
Common Mistakes and How to Avoid Them
Avoiding common errors when filing IRS Form 1127 (2013) can improve your chances of approval and prevent unnecessary delays.
- Confusing Filing Extensions with Payment Extensions: Filing Form 4868 only extends the deadline to file a tax return, while Form 1127 extends the time to make the tax payment; both forms serve different purposes.
- Providing Vague Explanations: Submitting general statements about financial hardship without a clear and detailed explanation can lead to denial; always include a precise description supported by verifiable financial information.
- Incomplete Documentation: Missing income and expense records, or failing to attach supporting documentation such as bank statements and financial statements, will result in the automatic rejection of your request.
- Filing After the Deadline: Late submission of Form 1127 will not stop late payment penalties or interest charges; the form must be filed on or before the original due date to be valid.
- Assuming Automatic Approval: Submitting the form does not guarantee approval; the IRS approves requests only after verifying that the taxpayer qualifies under the undue hardship criteria.
Taxpayers with unfiled federal income tax returns should resolve those quickly to avoid additional IRS action.
What Happens After You File IRS Form 1127 (2013)
Once Form 1127 is filed, the IRS reviews the taxpayer’s financial situation and evaluates whether an extension of time to pay is justified. If approved, the taxpayer receives written confirmation specifying the new payment deadline and conditions. Interest charges continue to accumulate on any unpaid tax until the balance is fully paid, even during the extension period. If denied, taxpayers must contact the IRS immediately to discuss payment arrangements, such as entering an installment agreement or requesting currently not collectible status.
FAQs
How can IRS Form 1127 (2013) help if I cannot pay taxes on time?
IRS Form 1127 (2013) allows taxpayers to request extra time to settle their tax debt when paying on time would cause financial hardship. While the extension helps avoid late payment penalties, interest still accrues until the balance is paid under current tax laws.
What should I include when filing Form 1127 (2013)?
When filing Form 1127 (2013), taxpayers must provide complete financial statements, a detailed explanation of hardship, and proof of their estimated tax liability. Accurate and truthful details help ensure compliance with IRS requirements and support the approval process.
Does IRS Form 1127 (2013) affect my estimated tax liability?
No, IRS Form 1127 (2013) only delays the payment of taxes owed; it does not change your estimated tax liability or reduce the total amount due. Interest continues to apply until the tax debt is paid in full.
When should I consult a tax professional?
You should consult a qualified tax professional when you are unsure how to document your financial hardship or calculate your estimated tax liability. A professional can ensure your filing form complies with tax laws and accurately reflects your financial situation.
Will using IRS Form 1127 (2013) affect my future tax obligations?
Filing Form 1127 does not change your ongoing tax obligations or estimated tax liability. It simply grants more time to pay taxes already owed, helping taxpayers manage temporary financial hardship without defaulting on their tax debt.
