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- Instructions for Form 8876 - Introductory Material
- General Instructions
- Specific Instructions
- Instructions for Form 8876 - Notices
Instructions for Form 8876 (12/2025)
Excise Tax on Structured Settlement Factoring Transactions
Revised: 12/2025
For the latest information about developments related to Form 8876 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form8876.
Electronic payments.
If you have access to U.S. banking services or electronic payment systems, you should use direct deposit for any refunds and pay electronically for any payments, whenever possible.
Direct deposit.
Direct deposit fields have been added onto the form on lines 7b, 7c, and 7d. If there is an overpayment on line 7a, enter your direct deposit information on lines 7b, 7c, and 7d. See Line 7 , later, for more information.
Making a payment.
If there is a balance due on line 6, go to IRS.gov/Payments for information on how to make a payment. See the instructions for Line 6 , later, for more information.
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:
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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
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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.
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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.
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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:
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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
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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.
Department of the TreasuryInternal Revenue Service Center
Kansas City, MO 64999–0019
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.
Late payment of tax.
Generally, the penalty for not paying tax when due is ½ 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.
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
If the amount on line 4 is more than the amount on line 5, subtract line 5 from line 4. This is the amount you owe.
Making a Payment.
The IRS recommends paying electronically whenever possible. Options to pay electronically include any of the payment options below. Also, go to IRS.gov/Payments, for more detailed information.
EFTPS.
Payment of the tax due may be submitted electronically through the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service of the Department of the Treasury. See IRS.gov/EFTPS and EFTPS.gov for more information.
Same-day wire.
Payment of the tax due shown on Form 8876 may be submitted electronically through same-day wire from your financial institution. Contact your financial institution for availability, cost, and time frames. See IRS.gov/SameDayWire or IRS.gov for the worksheet and more information.
Paying by check.
Make the check payable to “United States Treasury.” Write the name, identifying number, and “Form 8876” on the check to assist us in posting it to the proper account. See IRS.gov/PayByMail for more information.
Line 7—Overpayment
If you have access to U.S. banking services, you should use direct deposit for any refunds, whenever possible. See IRS.gov/DirectDeposit for more information. Direct deposit is available for this form. If there is an overpayment when filing your return, complete lines 7b, 7c, and 7d to input your direct deposit information.
Line 7b
The routing number must be nine digits. The first two digits must be 01 through 12 or 21 through 32. Ask your financial institution for the correct routing number to enter on line 7b if:
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The routing number on a deposit slip is different from the routing number on your checks,
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Your deposit is to a savings account that doesn’t allow you to write checks, or
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Your checks state they are payable through a financial institution different from the one at which you have your checking account.
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, go to IRS.gov/PTIN.
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 | 3 hr., 6 min. |
| Learning about the law or the form | 1 hr., 12 min. |
| Preparing 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 send us comments through IRS.gov/FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Don’t send Form 8876 to this address. Instead, see Where To File, earlier.