Letter 4387: Request for Extension of Time to Pay Tax Due

Understanding IRS Letter 4387: Request for Extension of Time to Pay Tax Due

Tax season can be stressful. Sometimes, you might find you owe more than you can comfortably pay right away. The IRS understands this can happen. That’s why they offer a way to request an extension of time to pay your tax bill. If you request this type of extension, you might receive Letter 4387. Let’s break down what this letter means and what you should do if you get it.

What Triggers Letter 4387?

Generally, you’ll receive Letter 4387 after you’ve filed your tax return and requested more time to pay what you owe. There are different ways to request an extension:

• Online Payment Agreement Application: If you try to set up a payment plan online, the system might find that you need more than a simple payment agreement. In this case, they will process an extension request and send a letter 4387.
• Form 1127: If you have a particularly large tax bill you can use form 1127 to request an extension. This form has specific requirements. Usually, you must show you’ll suffer “undue hardship” if you have to pay taxes on time.
• Other IRS communications: You may request an extension over the phone or via written correspondence.

Regardless of how you apply, the IRS reviews your request. If it meets the standards, you will receive Letter 4387. This letter confirms they’ve processed your request.

Decoding the Content of Letter 4387

Letter 4387 isn’t just a random notice. It has very important details you need to know. The core purpose of the letter is to communicate whether your request to extend payment was granted or denied. Here’s what you can expect to find in the letter:

• Confirmation of Request: The letter starts by acknowledging that you requested an extension of time to pay your taxes.
• Approval or Denial: The most crucial information is whether the IRS granted your request. If approved, the letter tells you how long you have and any conditions attached. If denied, the letter explains why and what you need to do to pay.
• Reasons for Denial: If the IRS denied your request, the letter will explain why. Common reasons include not showing enough hardship, the debt being too large for a short-term extension, or you having a history of non-compliance.
• New Payment Deadline (if approved): The letter clearly states when your new payment deadline is. Note that interest and penalties can still apply even with a payment extension.
• Amount Due: The letter usually shows the exact amount you still owe. This might include interest and penalties.
• Instructions for Payment: The letter will guide you on how to pay your taxes. It provides various payment methods such as online, by phone, or by mail.
• Appeal Information: If your request is denied, the letter usually tells you how to appeal the decision, if it’s appropriate.
• Contact Information: It includes phone numbers and addresses for any queries.

Key Differences: Extension of Time to Pay vs. Extension to File

It’s important not to confuse an “extension of time to pay” with an “extension of time to file” your taxes. An extension to file gives you more time to submit your tax return. But it does NOT give you more time to pay your tax bill. The taxes are still due on the original deadline. Even if you have an extension to file, you may still need Letter 4387 if you need an extension to pay.

Who Can Request an Extension to Pay?

Any taxpayer who cannot pay their tax bill on time can request an extension to pay. However, the IRS doesn’t grant these extensions lightly. They consider factors like:

• Reasonable cause: There must be a valid reason that you can’t pay your taxes on time. This could be financial hardship. It also can include temporary loss of income, medical bills, or other significant events.
• Financial circumstances: You must show that you are genuinely unable to pay your taxes when they are due.
• Payment history: The IRS will look at your tax payment history. If you are late often, it can negatively affect your chances of getting an extension.
• Amount of tax debt: If you owe a large sum, the IRS may not grant an extension. They might suggest a payment plan.

Examples of When Letter 4387 Might Be Issued

Here are some scenarios where you might encounter Letter 4387:

• Example 1: Job Loss: You lose your job and your income decreases. You can’t pay your taxes on time, so you request an extension. The IRS may send Letter 4387 to approve or deny this request.
• Example 2: Unexpected Medical Expenses: You have a large, unexpected medical bill. This makes it hard to pay your tax bill. You might request an extension and receive Letter 4387.
• Example 3: Business Difficulties: A small business owner faces a downturn, reducing income. They request an extension to pay. They then receive Letter 4387 stating the status of their request.
• Example 4: Tax Bill Larger Than Expected: You file your taxes and realize that the tax bill is larger than expected. You apply for an extension, and the IRS will send you Letter 4387.

What to Do if You Receive Letter 4387

Receiving this letter can feel stressful. But it is a straightforward process. Here are some steps to take:

1. Read it carefully: Start by reading the letter very carefully. Note the IRS’ decision about your request, payment dates, and any conditions.
2. If approved: Pay the full amount by the new deadline to avoid penalties and further interest.
3. If denied: The letter tells you why your request was denied and how to pay. Follow these instructions. If the reason seems wrong, you have the right to appeal.
4. Payment plans: If you are denied an extension, explore setting up a payment plan. This lets you pay over time. The IRS may offer short-term or long-term payment options.
5. Appeal: If you think the IRS made an error, you can appeal. The letter will usually tell you the proper method to appeal your request.
6. Contact the IRS: If you have questions or need clarification, contact the IRS. Use the contact information in the letter.
7. Keep records: Keep all correspondence from the IRS for your records.

Common Mistakes and Misconceptions About Payment Extensions

• Misconception: Getting an extension means you don’t owe interest or penalties.
  • Reality: Interest and penalties will continue to accrue. You are only getting more time to pay the balance.
• Mistake: Ignoring Letter 4387 if your request is denied.
  • Reality: This could lead to more interest, penalties and further collection action.
• Misconception: Everyone gets an extension if they ask.
  • Reality: The IRS has to have a valid reason to grant a payment extension.
• Mistake: Confusing “Extension to File” with “Extension to Pay.”
  • Reality: These are two very different kinds of extensions. An extension to file has no impact on when the tax debt must be paid.
• Misconception: If your request is approved, the IRS won’t follow up
  • Reality: If you don’t make payments by the due date, the IRS will continue to collect and charge more penalties and interest.

Related Tax Terms

Here are some other concepts related to payment extensions:

• Payment Agreement/Installment Agreement: A plan to pay your taxes over time.
• Form 1127: Application for Extension of Time for Payment of Tax Due to Undue Hardship.
• Failure to Pay Penalty: A penalty charged for not paying your taxes by the due date.
• Interest on Taxes: Interest is charged on any unpaid tax balance from the due date until the debt is paid.
• Offer in Compromise (OIC): A way to settle tax debt for less than what you owe.
• Tax Lien: A legal claim on your property for unpaid taxes.

In Conclusion

Receiving an IRS letter can be scary. However, Letter 4387 is just a notice letting you know about your extension request status. The key thing is to read the letter carefully. Then understand your next steps based on the IRS’s decision. If you follow the instructions, you can resolve your tax payment situation effectively. Remember that, if you struggle to understand these letters, seek the help of a tax professional.