Instructions for Form 8876

Instructions for Form 8876

(December 2025)

Excise Tax on Structured Settlement Factoring Transactions

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 IRS.gov/Form8876.

What’s New

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.

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.

• The creation or perfection of a security interest in structured

settlement payment rights under a blanket security agreement

Dec 2, 2025

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:

• 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.

Department of the Treasury

Internal 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.

Instructions for Form 8876 (12-2025) Catalog Number 95793S

Department of the Treasury Internal Revenue Service www.irs.gov

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 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

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

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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 7a

If line 7a is under $1, we will send a refund only on written

request.

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:

• The routing number on a deposit slip is different from the

routing number on your checks,

• Your deposit is to a savings account that doesn’t allow you to

write checks, or

• Your checks state they are payable through a financial

institution different from the one at which you have your checking

account.

Line 7c

Check the appropriate box for the type of account. Don’t check

more than one box. You must check the correct box to ensure

your deposit is accepted.

Line 7d

The account number can be up to 17 characters (both numbers

and letters). Include hyphens but omit spaces and special

symbols. Enter the number from left to right and leave any

unused boxes blank. Don’t include the check number.

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.

Instructions for Form 8876 (Dec. 2025)

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.

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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 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 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.

Instructions for Form 8876 (Dec. 2025)

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