The trustee (or executor) of an estate is responsible for filing Form 1041 for estate tax. It is important to note the difference with an individual beneficiary who must also file estate tax on his personal individual Form 1040. These are two different tax forms.
U.S. Income Tax Return for Estates and Trusts
While the Form 1040 is standard for individual income taxes, the Form 1041 is for estate and trust taxes. The person responsible for managing the estate may be called administrator, executor, grantor, trustee or fiduciary – it all depends on the type of organization. The trustee must check all types of the trust or estate that apply: decedent estate, simple trust, complex trust, qualified disability trust, grantor type, bankruptcy or pooled income trust.
The trustee can use the normal time period ending December 31st or select a different time period lasting 12 months. The Form 1041 must be filed for domestic estate fiduciary above $600 or nonresident alien beneficiary. The Form 1041 must be filed for domestic trust above $600, any taxable income and nonresident alien beneficiary.
The trustee must fill in the name of the estate, title of fiduciary, address, employer identification number (EIN) and date entity was created. Each estate must have its own EIN. The next section of 1041 is similar to the personal income form requesting information on interest, total ordinary dividends, business income, capital gain, rents and farm income. Fiduciary fees must also be listed.
Are there wages or compensation from contract assignment? Banks or securities in foreign countries have their own entry line.
The trustee must file Schedule K-1 for each trust beneficiary. The beneficiary must report this Schedule K-1 for filing estate tax information on his own personal 1040 form. Estate taxes are due on assets above a certain amount.
Estate Retaining Income-Generating Assets
The government accepts that it may take up to 2 years to properly dispose of or distribute a deceased’s estate. Trustees must explain why such an estate is still running after two years. Usually, a deceased estate is still open due to income-generating assets that would be damaged by breaking up said estate.