Who Must File
The fiduciary of an estate must file Form 1041 if the estate had more than $600 in taxable income or if there is a beneficiary who is a nonresident alien. In the case of a trust, the fiduciary must file Form 1041 if the trust had any taxable income or a nonresident alien beneficiary. The fiduciary signs the tax return.
What Is Taxed
According to the IRS, Form 1041 accounts for “income in respect of a decedent,” which is any income paid to the decedent after the date of death. Examples include deferred salary payable to the estate, uncollected interest on U.S. savings bonds or lump-sum distributions to the beneficiaries of the decedent’s individual retirement account. Posthumous income to an estate or trust has the same character it would have had if paid to the decedent while he was alive.
Form 1041 Deductions
Most deductions and credits allowed to an individual are also allowed for estates and trusts of a decedent, but there’s one major distinction. The fiduciary can deduct from income the distributions being paid to beneficiaries because the tax on those distributions are paid by the beneficiaries, not the estate or trust.
When to File
For estates and trusts operating on a calendar year, Form 1041 must be filed by April 15 of the year following the year of death and each April 15 thereafter. For estates and trusts operating on a fiscal year, Form 1041 must by filed by the 15th day of the fourth month following the close of the fiscal year. The fiduciary can choose whether the tax period is the calendar year or a fiscal year. Fiduciaries can get an automatic five-month extension of time to file a Form 1041 but must pay estimated tax by the normal due date.
The fiduciary of an estate or trust must make quarterly estimated tax payments if he expects the estate or trust to owe at least $1,000 in taxes after subtracting withholding and credits and if he expects the withholding and credits will total less than the smaller of either 90 percent of this year’s expected tax liability or 100 percent of the previous year’s tax liability. Fiduciaries report estimated tax payments on Form 1041.