Originally Posted by naholmes
#1;I completed and e-filed our taxes and I totally forgot to report this income. My understanding is that I should have reported it on line 21 of the 1040 as other income.
#2;Now do I need to file an amendment? Or can we just return the money back into the estate account and try again for 2014? Or can we report it as a principal distribution so that it's not taxable since we have not trust taxes yet (although the check says "executor fees" on the memo line)?
#1; Under federal tax laws, executor’s fees are taxable income; the fee is taxable income. You neeed to report it on line 21 of the Form 1040. Declaring your executor fees as non-employee compensation means that they are taxed at your marginal income tax rate, which depends on the level of your AGI.
#2; I guess yu need to file 1040x; as you need to report additional income that you did not include in your gross income, you'll need to file an amendment.
regardless of whether you receive a 1099/w2, you are subject to income taxes on the earned income. This is why so many executor's waive their fees and just take distributions which are not subject to income taxes