Form 8876 Excise Tax on Structured Settlement Factoring Transactio

8876

Excise Tax on Structured
Settlement Factoring Transactions

Form
(Rev. December 2011)
Department of the Treasury
Internal Revenue Service

▶

OMB No. 1545-1826

See instructions below.

Date of receipt of structured settlement payment rights .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Please
Type
or
Print

.

▶

Identifying number

Name
Number, street, and room or suite no. (If a P.O. box, see instructions.)
City or town, state, and ZIP code

1

Total undiscounted amount of structured settlement payments being acquired .

.

.

.

.

.

1

2

Total amount paid for the above structured settlement payment rights .

.

.

.

.

.

.

.

.

2

3

Factoring discount. Subtract line 2 from line 1 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

3

4

Tax. Multiply line 3 by 40% (.40)

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

4

5

Less: Tax paid with Form 7004 .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

5

6

Tax due. Subtract line 5 from line 4. If zero or less, enter -0- .

.

.

.

.

.

.

.

.

.

.

.

6

7

Overpayment. If line 5 is greater than line 4, subtract line 4 from line 5

.

.

.

.

.

.

.

.

7

▲

Paid
Preparer
Use Only

▲

Sign
Here

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my
knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any
knowledge.

Date

Signature

Print/Type preparer’s name

Preparer's signature

Title (if any)

Date

Check
if
self-employed

Firm’s name

▶

Firm's EIN

Firm's address

▶

Phone no.

What's New
The IRS has created a page on IRS.gov
for information about Form 8876 and its
instructions at www.irs.gov/form8876.
Information about any future
developments affecting Form 8876 (such
as legislation enacted after we release it)
will be posted on that page.

General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.

Purpose of Form
Use Form 8876 to report and pay the 40%
excise tax imposed under section 5891 on
the factoring discount of a structured
settlement factoring transaction. File a
separate Form 8876 for each date on
which you received structured settlement
payment rights in one or more structured
settlement factoring transactions.

Definitions
Structured settlement. A structured
settlement is an arrangement:

1. Established (a) by suit or agreement
for the periodic payment of damages
excludable from the gross income of the
recipient under section 104(a)(2) or (b) by
agreement for the periodic payment of
compensation under any workers’
compensation law excludable from the
gross income of the recipient under
section 104(a)(1) and
2. Under which the periodic payments
are (a) of the character described in
section 130(c)(2)(A) and (B) and (b) payable
by a person who is a party to the suit or
agreement or to the workers’
compensation claim or by a person who
has assumed the liability for such periodic
payments under a qualified assignment in
accordance with section 130.
Structured settlement factoring
transaction. A structured settlement
factoring transaction is a transfer of
structured settlement payment rights
(including portions of structured settlement
payments) made for consideration by
means of sale, assignment, pledge, or
other form of encumbrance or alienation
for consideration.
The following are not structured
settlement factoring transactions.

For Privacy Act and Paperwork Reduction Act Notice, see page 2.

PTIN

▶

1. The creation or perfection of a security
interest in structured settlement payment
rights under a blanket security agreement
entered into with an insured depository
institution in the absence of any action to
redirect the structured settlement
payments to that institution (or agent or
successor thereof) or otherwise to enforce
such blanket security interest as against
the structured settlement payment rights.
2. A subsequent transfer of structured
settlement payment rights acquired in a
structured settlement factoring transaction.
Structured settlement payment rights.
Structured settlement payment rights are
rights to receive payments under a
structured settlement.
Factoring discount. The factoring
discount is the difference between the total
undiscounted amount of structured
settlement payments being acquired (line 1)
and the total amount paid by the acquirer
to the person(s) from whom the structured
settlement payment rights are acquired
(line 2).
Qualified order. A qualified order is a final
order, judgment, or decree that:

Cat. No. 33529K

Form

8876

(Rev. 12-2011)

Form 8876 (Rev. 12-2011)

• Finds that the transfer of structured
settlement payment rights does not
contravene any federal or state statute or
the order of any court or responsible
administrative authority, and is in the best
interest of the payee, taking into account
the welfare and support of the payee’s
dependents and
• Is issued under the authority of an
applicable state statute by an applicable
state court, or by the responsible
administrative authority (if any) that has
exclusive jurisdiction over the underlying
action or proceeding that was resolved by
means of the structured settlement.

Who Must File
Generally, you must file Form 8876 if you
acquire directly or indirectly structured
settlement payment rights in a structured
settlement factoring transaction entered
into after February 21, 2002. However, do
not file Form 8876 if the transfer of
structured settlement payment rights was
approved in advance in a qualified order,
as no excise tax is due.

When To File
File Form 8876 by the 90th day following
the receipt of structured settlement
payment rights in a structured settlement
factoring transaction.
If you need more time, file Form 7004,
Application for Automatic Extension of
Time To File Certain Business Income Tax,
Information, and Other Returns, by the due
date of Form 8876. Form 7004 does not
extend the time for payment of tax.

Where To File
File Form 8876 with the Internal Revenue
Service Center, Cincinnati, OH 45999.

Rounding Off to Whole
Dollars
You can round off cents to whole dollars
on your return and schedules. If you do
round to whole dollars, you must round all
amounts. To round, drop amounts under
50 cents and increase amounts from 50 to
99 cents to the next dollar. For example,
$1.39 becomes $1 and $2.50 becomes $3.
If you have to add two or more amounts
to figure the amount to enter on a line,
include cents when adding the amounts
and round off only the total.

Amended Return
To amend a previously filed Form 8876,
file a corrected Form 8876 and write
“Amended” at the top of the form.

Interest and Penalties
Interest. Interest is charged on taxes not
paid by the due date at a rate determined
under section 6621.
Late filing of return. Generally, a penalty
of 5% a month or part of a month, up to a
maximum of 25%, is imposed on the net
amount due if Form 8876 is not filed when

Page

due. This penalty will not be imposed if
you have reasonable cause for not filing on
time. If you do, attach an explanation.
Late payment of tax. Generally, the
penalty for not paying tax when due is
1/2 of 1% of the unpaid amount, up to a
maximum of 25%, for each month or part
of a month the tax remains unpaid. The
penalty is imposed on the net amount due.
This penalty will not be imposed if you
have reasonable cause for not paying on
time.

Additional Information
For more details, see section 5891 and
Regulations section 157.5891-1.

Specific Instructions
Name and address. Enter the name
shown on your most recently filed federal
income tax return. Include the suite, room,
apartment, or other unit number after the
street address. If the Post Office does not
deliver mail to the street address and the
taxpayer has a P.O. box, show the box
number instead of the street address.
Identifying number. If you are an
individual, enter your social security
number. Other filers should enter their
employer identification number.
Line 5. Tax paid with Form 7004. If you
filed Form 7004 for the payment rights
received on the date shown on the top of
this Form 8876, enter the amount of tax
paid, if any, when you filed that extension
application.
Line 6. Tax due. Make your check or
money order payable to “United States
Treasury.” Write your name, address,
identifying number, and “Form 8876” on
the check or money order.
Line 7. Overpayment. The IRS will refund
the amount on line 7 (to the extent you
owe no other taxes).
Signature. For information on who must
sign Form 8876, see the instructions for
the signature section of your federal
income tax return.
Privacy Act and Paperwork Reduction
Act Notice. These Acts require that when
we ask you for information we must first
tell you our legal right to ask for the
information, why we are asking for it, and
how it will be used. We must also tell you
what could happen if we do not receive it
and whether your response is voluntary,
required to obtain a benefit, or mandatory
under the law.
Our legal right to ask for information is
sections 6001, 6011, and 6012(a) and their
regulations, which require you to file a
return or statement with us for any tax for
which you are liable. Your response is
mandatory under these sections. Section
6109 requires you to provide your
identifying number. This is so we know
who you are, and can process your return
and other papers. You must fill in all parts
of the tax form that apply to you.

2

You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. We ask for the
information on this form to carry out the
tax laws of the United States. We need it
to figure and collect the right amount of
tax. If you do not file a return, do not
provide the information we ask for, or
provide fraudulent information, you may
be charged penalties and be subject to
criminal prosecution.
Generally, tax returns and return
information are confidential, as required by
section 6103. However, section 6103
allows or requires the Internal Revenue
Service to disclose or give the information
shown on your tax return to others as
described in the Code. For example, we
may disclose your tax information to the
Department of Justice to enforce the tax
laws, both civil and criminal, and to cities,
states, the District of Columbia, U.S.
commonwealths or possessions, and
certain foreign governments to carry out
their laws. We may also disclose this
information to other countries under a tax
treaty, to federal and state agencies to
enforce federal nontax criminal laws, or to
federal law enforcement and intelligence
agencies to combat terrorism.
Please keep this notice with your
records. It may help you if we ask you for
other information. If you have any
questions about the rules for filing and
giving information, please call or visit any
Internal Revenue Service office.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated average
time is:
Recordkeeping . . . . 3 hr., 6 min.
Learning about the law
or the form . . . . . 1 hr., 12 min.
Preparing, copying, assembling, and
sending the form to the IRS 1 hr., 17 min.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. You
can write to the Internal Revenue Service,
Tax Products Coordinating Committee,
SE:W:CAR:MP:T:M:S, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224.
Do not send the tax form to this address.
Instead, see Where To File on this page.