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Extensions of Time to Pay – Per IRC 6161
Taxpayers may use Form 1127, Application for Extension of Time for Payment of Tax, to apply for an extension of time to pay tax shown on their return.
The Internal Revenue Service will grant the extension provided the taxpayer is able to show that undue hardship will be suffered if payment is made on the payment due date (see IRC 6161(a) and regulations relating thereto). If granted, the extension generally may not exceed 6 months (12 months in the case of estate tax).
Taxpayers may also use Form 1127 to request an extension of time to pay certain taxes determined as a deficiency, providing the deficiency is not the result of negligence, intentional disregard of rules and regulations, or fraud with the intent to evade tax. The IRS must be satisfied that payment of the deficiency upon the date fixed for the payment thereof would result in undue hardship to the taxpayer.
If granted, the extension may not exceed 18 months; and in exceptional cases, an additional 12 months.
If an extension of time to pay is granted, the failure to pay (FTP) penalty for the underlying tax will not begin to accrue until after the expiration of the extension period.
Deferred payment arrangements (i.e., when the Service grants additional time to pay before initiating enforced collection action) are not extensions of time to pay under IRC 6161. The penalty for failure to pay does accrue during any deferral period.
For extensions of time to pay estate and gift taxes see IRM 4.25.2.1.1, Extension of Time to File Estate Tax Returns — IRC Section 6081 through IRM 4.25.2.1.5, Estate Tax Extension of Time to Pay Under IRC section 6163 and Delegation Order 4–3 in IRM 1.2.43.4, Delegation Order 4–3 (formerly DO-20, Rev. 3).
Except in the case of an extension to pay gift tax, IRS currently is not able to compute the FTP penalty systemically if an extension of time to pay was granted under IRC 6161 and the tax is not paid in full by the extended due date. In all such cases the FTP penalty must be manually computed and assessed. For specific processing instructions see IRM 5.1.12.1, Overview — Cases Requiring Special Handling.
Extensions of time to pay are disregarded in determining the date prescribed for payment for the purpose of computing interest or the penalty for filing late.
