October 14, 2014

Is a Fiduciary Return Required?

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On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.

Generally, income attributable to a decedent up to the time of death is included in the decedent's final individual tax return. Upon death, income that would have been attributable to the decedent is now income to the decedent's estate and reported on the estate's income tax return.

Form 1041 (fiduciary tax return) is the income tax return used for the estate. It is used to report income on the assets in the estate, including sales of property. The estate exists until final distribution of its assets. The tax year can be a calendar year or a fiscal year--the type of year is chosen when the first 1041 is filed for the estate. Once chosen, the tax year can only be changed with IRS permission.

Filing requirement - A return must be filed if the estate has gross income of $600 or more. However, if one or more beneficiaries are a nonresident alien, Form 1041 must be filed even if the gross income is less than $600.

K-1s – Schedule K-1s are filed with the 1041 for each beneficiary. A copy of the K-1 must be furnished to each beneficiary. The K-1 shows the allocation of the beneficiary’s share of the estate’s income and losses that the beneficiary will need to report on his or her income tax return.

Because of the complexity of fiduciary returns, you should contact this office for your preparation needs.

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Is a Fiduciary Return Required?