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Form 8725: Excise Tax on Greenmail
IRS Form 8725 is used to report and pay the 50% excise tax imposed under section 5881 on greenmail; filers must submit it by the 90th day following receipt of any portion of the greenmail.
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IRS Form 8725 - Excise Tax on Greenmail
IRS Form 8725 is used to report and pay the 50% excise tax imposed under section 5881 on greenmail; filers must submit it by the 90th day following receipt of any portion of the greenmail.
Risk Radar
Scan points- 1Failing to file by the 90th day after receiving greenmail triggers penalties immediately.
- 2Filing without a separate Form 8725 for every stock transfer agreement.
- 3Not showing money items as whole dollars when rounding off amounts under 50 cents or over 99 cents.
- 4Using an outdated version of Form 8725 (ensure the revision date reads 12-2025).
- 5Failing to include a copy of the form if using a paid preparer who is not an employee.
Plain English
This form allows a taxpayer to officially report income received as 'greenmail' and pay the required excise tax on that gain. Greenmail is payment made to a shareholder for their stock, usually when they held it for less than two years. Filing this form ensures the proper 50% tax is accounted for.
Submission Date
- Filing date: 2026-01-08 12:10:40
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when an individual or corporation is liable for the excise tax on greenmail imposed under section 5881 by realizing gain or other income from receiving greenmail.
- Do not use Form 8725 if the amount received does not meet the definition of 'greenmail,' which requires payment to a shareholder who held stock for less than 2 years and is related to a corporation under specific criteria.
- Check Form 7004 instead when needing an automatic extension of time to file Form 8725.
Form selector
Use this form or another form?
Tax paid via Form 7004
This form is used if tax was already paid when filing the extension, as Form 8725 does not automatically reflect that payment.
✓ Check Line 7 on Form 8725.
Amending a previously filed return
If changes are needed after initial submission, file a corrected copy and write 'Amended' at the top of the form.
✓ Ensure you attach pages if necessary.
Reporting other subject income
Any gain or other income subject to the excise tax that is not part of the main greenmail calculation must be reported here.
✓ Do not forget to include this amount in the total on Line 5.
Deadline or filing window
The trigger event for filing Form 8725 is the receipt of any portion of the greenmail. The deadline is the 90th day following that receipt date. An extension can be requested using Form 7004, but this form does not extend the time for tax payment.
Checklist
What you need before filling it out
Greenmail definition
Amount paid by a corporation/person acting in concert to a shareholder if stock was held for <2 years and conditions met · Instructions p.1
Filing Deadline
90th day following receipt of any portion of the greenmail · Instructions p.1
Tax Due Payment Method
Electronic options include EFTPS and direct deposit (Lines 9b, 9c, 9d) · Instructions p.2
Line 8 Requirement
Must pay the tax due in full when filing Form 8725 · Instructions p.2
Tax Paid With Form 7004
Amount paid when filing Form 7004 · Line 7 on Form 8725
Rounding Off Rule
Amounts under $0.50 are dropped; amounts from $0.50–$0.99 increase to the next dollar · Instructions p.1
Before you submit
- 1Ensure you enter your name and address as shown on your most recent federal income tax return.
- 2Verify that Line 6 (Tax) reflects the correct 50% excise tax amount calculated from total gain/other income.
- 3Confirm that if there is a balance due, the required tax payment is included or accounted for in Line 8.
- 4If you used Form 7004 to extend time, verify the tax paid on that extension is entered on Line 7.
- 5Check that any other income subject to the excise tax is correctly entered on Line 4.
- 6Confirm that if paying electronically, your direct deposit information is present on lines 9b, 9c, and 9d (if applicable).
- 7If attaching extra pages, confirm you have written your name and identifying number on each attachment.
How to file this form
- 1Enter the required personal details, including name and address, onto Form 8725.
- 2Calculate and enter the total gain and other income realized from greenmail onto Line 5.
- 3Determine the excise tax amount (50%) and enter it on Line 6, ensuring any necessary rounding is applied.
- 4Enter the amount of tax paid when filing Form 7004 onto Line 7, if applicable.
- 5Verify that the final tax due amount is correctly listed on Line 8, which must be paid in full.
- 6Pay the total tax due by mailing the form or submitting it electronically via EFTPS (or other accepted method).
- 7Mail Form 8725 to the Department of the Treasury at Internal Revenue Service, Kansas City, MO 64999.
Known limitations
- 1A separate Form 8725 must be filed for each agreement made to transfer stock.
- 2If an overpayment is less than $1, a refund from IRS Form 8725 will only be sent upon written request.
- 3When rounding money items, amounts under 50 cents are dropped, and amounts from 50 to 99 cents increase to the next whole dollar.
Field map
Compact field-by-field guide
General Info
2 items
Full legal name and taxpayer identification number (SSN or EIN).
Current mailing address.
Details
2 items
Complete all applicable sections of this form according to the official IRS instructions.
Enter the relevant dollar amount if this form involves tax calculation.
Certification
1 items
Read and acknowledge any certifications required by this form.
Signatures
1 items
Sign and date. Unsigned forms cannot be processed.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is Revision December 2025 (12-2025). For the latest information regarding Form 8725, filers should consult IRS.gov/Form8725.
What changed or needs a fresh check
- Edition date — confirm the revision date reads 12-2025.
- Mailing address — confirm the filing address is Kansas City, MO 64999.
- Signature — follow instructions detailed in the signature section of your federal income tax return.
- Tax rate — confirm the excise tax rate is 50% (imposed under section 5881).
- Rounding rule — confirm amounts are rounded to whole dollars, dropping amounts under $0.50 and rounding up from $0.50 to $0.99.
- Catalog number — verify the form has Catalog Number 95777S.
Quick Facts
Downloads
After you file
- 1Keep a copy of the filed Form 8725.
- 2If amending the return, file a corrected Form 8725 and write "Amended" at the top of the form.
- 3Attach separate pages if more space is needed on Form 8725; these attached pages must include the filer's name and identifying number.
- 4Use electronic payment/direct deposit whenever possible for payments or refunds related to IRS Form 8725.
Sources
- SRCInstructions p.1 — The purpose of Form 8725 is to report and pay the 50% excise tax imposed under section 5881 on greenmail.
- SRCInstructions p.1 — Greenmail is defined as an amount paid by a corporation (or related party) to a shareholder if the shareholder held the stock for less than 2 years before entering into the agreement.
- SRCInstructions p.1 — Filers must submit Form 8725 by the 90th day following receipt of any portion of the greenmail.
- SRCInstructions p.1 — When filing, use the address: Department of the Treasury Internal Revenue Service Kansas City, MO 64999.
- SRCInstructions p.2 — If there is an overpayment on Form 8725, complete lines 9b, 9c, and 9d for direct deposit information.
- SRCForm p.1 — The form revision date currently on file is December 2025 (as of the document creation date of 5/22/25).
Common confusion points
What if my greenmail gain is recognized, but I use a different method of accounting?
Greenmail is considered received under your method of accounting regardless of whether the gain or other income is recognized.
→ Check Line 1 on Form 8725 for confirmation.
How do I calculate my basis when inheriting stock?
If you inherited the stock, you may not be able to use the actual cash cost as the basis; attach an explanation if this is the case.
→ Refer to Instructions p.2 for more details on basis calculation.
When should I file Form 8725 if I receive greenmail in installments?
File Form 8725 by the 90th day following receipt of any portion of the greenmail.
→ Note that this deadline applies to each portion received.
Does filing Form 7004 extend my payment deadline for IRS Form 8725?
No, Form 7004 does not extend the time for payment of tax.
→ Verify the status on Line 1 of the instructions.
What is 'greenmail'?
Greenmail means any amount a corporation (or related party) pays to a shareholder to acquire their stock if specific conditions are met.
→ Check Definitions on Instructions p.1.
How do I report my direct deposit info for an overpayment?
Complete lines 9b, 9c, and 9d on Form 8725 when there is an overpayment on line 9a.
→ Ensure the routing number entered on Line 9b has nine digits.
Workflow map
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⚠ If something goes wrong
- Use IRS.gov/Form8725 for the latest developments related to this form.
Questions about IRS Form 8725
What is IRS Form 8725 used for?
This form allows a taxpayer to officially report income received as 'greenmail' and pay the required excise tax on that gain. Greenmail is payment made to a shareholder for their stock, usually when they held it for less than two years. Filing this form ensures the proper 50% tax is accounted for.
Who must file IRS Form 8725?
A person must file Form 8725 if that person is liable for the excise tax on greenmail under section 5881. A separate Form 8725 must be filed for each agreement made to transfer stock.
What information does IRS Form 8725 require?
The form collects details about the transaction, including information related to the receipt of greenmail. Specific instructions direct attention to Line 8 for more details on the reporting and payment amounts.
When is IRS Form 8725 due?
Form 8725 must be filed by the 90th day following receipt of any portion of the greenmail. If more time is needed, Form 7004 can be used to request an automatic extension.
Where do I file IRS Form 8725?
The form must be mailed to the Department of the Treasury Internal Revenue Service at Kansas City, MO 64999. Electronic payment options are available for payments and refunds.
How do I complete IRS Form 8725?
First, complete all required information, ensuring the name and address match your most recent federal income tax return. Next, calculate the amounts owed and enter them onto the form. Finally, sign the document (or have a paid preparer sign it) before mailing or submitting electronically.
What happens if IRS Form 8725 is filed incorrectly?
If Form 8725 is not filed when due, a penalty of 5% a month or part of a month, up to a maximum of 25%, is imposed on the net amount due. Failure to pay tax when due also incurs penalties.
What if my greenmail gain is recognized, but I use a different method of accounting?
Greenmail is considered received under your method of accounting regardless of whether the gain or other income is recognized. Check Line 1 on Form 8725 for confirmation.
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