When a property owner dies, a fiduciary manages the estate. Often, a lawyer or other professional may be hired as a fiduciary. But many times one of the heirs or beneficiaries may serve as a fiduciary. The fiduciary is in charge of filing Form 1041. But a trust tax preparer is usually hired to complete the form. And we offer our help in filing the estate income tax return. The IRS code mandates that the fiduciary file this form if the estate receives income of more than $600. Also, the form has to be filed if one of the beneficiaries is a foreign citizen who lives in another country.
Form 1041, U. S. Income Tax Return for Estates and Trusts, must be filed if the estate has any tax liability. Even if it earns less than $600 the return has to be filed. Form 1041 must be filed if the entity earns more than $600 in gross income. This rule holds true even where no revenue is subject to trust income taxes. The will or a court may appoint an executor to manage the estate or trust. According to the IRS, the executor must file this form each year. Filing must continue throughout the entire period for which the executor has authorization to manage the account. And this must be done even if the executor transfers all of the assets to the beneficiaries.
If the fiduciary does not have to file Form 1041, regardless of the reason, the fiduciary should probably file anyway. Even if the trust lost money, the fiduciary should file the form. The IRS allows a taxpayer to carry over some types of losses. Consequently, it creates a deduction that the taxpayer can use to reduce tax liability in future years.
Our company offers tax preparation for form 1041 and form 706 for clients nationwide. We also work with the fiduciary to track income and expenses for financial reporting purposes. And the same information can be used for estate planning. Or it may be that you need returns prepared for smaller entities to meet the IRS, or your state’s guidelines. It should be noted that sometimes these tax returns have to be prepared simply to meet the guidelines of your state. Therefore, even where it is not required by the IRS, the return may be required by your state. Ask one of our CPAs about more details.