Who Must File a 1041 Form With the IRS?

Who Must File a 1041 Form With the IRS?
Filing Form 1041 for Estates and Trusts

Fiduciary

When a property owner dies, a fiduciary manages the estate. Heirs may hire a lawyer or other professional as a fiduciary, or one of the heirs may serve as a fiduciary. The fiduciary is in charge of filing Form 1041. According to the IRS, the fiduciary must file this form if the estate receives income of more than $600, or if one of the estate's beneficiaries is a foreign citizen who lives in another country.

Limits

The trust must file this form if it has any income tax liability, even if it earns less than $600. The trust must also file Form 1041 if it earns more than $600 in gross income, even if none of this income is subject to trust income taxes. According to the University of Georgia, the trust can deduct the payments it makes to beneficiaries from its taxable income, since the beneficiaries will be paying taxes on this income themselves.

Warning

The will, or a court, may appoint an executor to manage the estate. When there is an executor, the executor must file the 1041 form. According to the IRS, the executor must file this form each year throughout the entire period in which the executor has authorization to manage the estate, even if the executor transfers all of the assets in the estate to the beneficiaries.

Benefits

A trust may also lose money during the year. If the fiduciary does not have to file Form 1041 because the trust lost money, the fiduciary should still file the form anyway. The IRS allows a taxpayer to carry over some types of losses, creating a deduction that the taxpayer can use to reduce tax liability in future years.

States

Some states have a state version of Form 1041. State eligibility requirements vary; the state of Ohio exempts some types of trusts, such as grantor trusts, retirement trusts and qualified funeral trusts, from the state filing requirement. The fiduciary who must file the federal Form 1041 is also responsible for filing any state Form 1041.