Federal Excise Tax on Structured Settlement Factoring Transactions

Excise Tax on Structured Settlement Factoring Transactions
Form 8876 (Rev. December 2013)
8876

Excise Tax on Structured
Settlement Factoring Transactions

Form
(Rev. December 2013)
Department of the Treasury
Internal Revenue Service

▶

OMB No. 1545-1826

Information about Form 8876 and its instructions is at www.irs.gov/form8876.

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 or province, country, and ZIP or foreign postal 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.

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

Future Developments
For the latest information about developments
related to Form 8876 and its instructions,
such as legislation enacted after they were
published, go to www.irs.gov/form8876.

General Instructions
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:

• 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
• 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 instructions.

PTIN

▶

• 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.
• 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. 12-2013)

Form 8876 (Rev. 12-2013)

• 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
Send Form 8876 to the following address:
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
due. This penalty will not be imposed if you
have reasonable cause for not filing on time.
If you do, attach an explanation.

Page

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. If the Post Office does not deliver mail
to the street address and you have a P.O.
box, show the box number instead of the
street address.
Foreign Address. Follow the country's
practice for entering the postal code. In some
countries the postal code may come before
the city or town name. Enter the full name of
the country using uppercase letters in English.
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.

Paid Preparer Use Only
A paid preparer must sign Form 8876 and
provide the information in the Paid Preparer
Use Only section at the end of the form if the
preparer was paid to prepare the form and is
not an employee of the filing entity. The
preparer must give you a copy of the form in
addition to the copy to be filed with the IRS.
If you are a paid preparer, enter your
Preparer Tax Identification Number (PTIN) in
the space provided. If you work for a tax
preparation firm, you must also enter the
firm's name, address, and EIN. However, you
cannot use the PTIN of the tax preparation
firm in place of your PTIN.
You can apply for a PTIN online or by filing
Form W-12, IRS Paid Preparer Tax
Identification Number (PTIN) Application and
Renewal. For more information about applying
for a PTIN online, visit the IRS website at
www.irs.gov/ptin.

2

Privacy Act and Paperwork Reduction Act
Notice. We ask for the information on this
form to carry out the Internal Revenue 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 subject to penalties.
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. You must fill
in all parts of the form that apply to you.
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.
Generally, tax returns and return
information are confidential, as required by
section 6103. However, section 6103 allows
or requires the IRS to disclose or give the
information shown on your tax return to
others as described there. 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, and U.S.
commonwealths or possessions to administer
their tax 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.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping . . .
Learning about the law
or the form
. . . .
Preparing, copying,
assembling, and sending
the form to the IRS . .

.

3 hr., 6 min.

.

1 hr., 12 min.

.

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
send your comments from www.irs.gov/
formspubs/. Click on “More Information” and
then on “Comment on Tax Forms and
Publications.” You can also write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW
IR-6526
Washington, DC 20224
Do not send the tax form to this address.
Instead, see Where To File, earlier.