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Old 05-27-2014, 12:11 AM
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Filing deadline

A relative died in 2013. He had all assets in a revocable trust that became irrevocable at death. I am the trustee. A final 1040 was filed for income up to the date of death but the 1041 for the period between the date of death and December 31, 2013 and has not been filed yet. I have obtained a new tax id for the trust. When is the first 1041 tax filing for the trust due and what time period would it cover? Since I did not file the short year 1041 for 2013, is it considered late and therefore subject to penalties? Is there any way to avoid these penalties?



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Old 05-27-2014, 09:02 PM
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A relative died in 2013. He had all assets in a revocable trust that became irrevocable at death. I am the trustee. A final 1040 was filed for income up to the date of death but the 1041 for the period between the date of death and December 31, 2013 and has not been filed yet. I have obtained a new tax id for the trust. When is the first 1041 tax filing for the trust due and what time period would it cover? Since I did not file the short year 1041 for 2013, is it considered late and therefore subject to penalties? Is there any way to avoid these penalties?

A relative died in 2013. He had all assets in a revocable trust that became irrevocable at death.============>>> A lot depends on the trust; generally a trust becomes irrevocable upon ones death. I know it stops being a revocable grantor trust for tax purposes when someone else becomes the trustee. A revocable trust funded before death allows the grantor to have complete access to and control over trust property during life and keeps such property out of the grantor’s probate estate at death. A revocable trust becomes irrevocable at the grantor’s death, and property held in the name of the trust is then administered and distributed according to the provisions in the trust document.


I am the trustee. A final 1040 was filed for income up to the date of death but the 1041 for the period between the date of death and December 31, 2013 and has not been filed yet. I have obtained a new tax id for the trust. When is the first 1041 tax filing for the trust due and what time period would it cover?==========>>>>>>>>>>> I guess it depends also. When a grantor of revocable trust dies, the trust becomes irrevocable. An irrevocable trust is an independent taxpayer in the eyes of the IRS, required to file its own tax return. Responsibility for completing the paperwork falls to the trustee appointed by the grantor.as you're the trustee, you may be able to take almost a year to file. As a trustee, you have a lot of flexibility in when to submit the first tax return. The first step is to pick a closing date for the trust's tax year. Suppose the grantor dies July 14. Some trusts must choose a calendar tax year ending Dec. 31. Other trusts can use a fiscal year with an ending date as far ahead as 11 months from the death. In this case, that would be June 14( when the grantor deceased) of the following year. The instructions for Form 1041 explain which trusts have that option. Once you set the closing date, you have 3.5 months after that to turn in the return. If you pick Dec. 31, for instance, that gives you until April 15. The form to file is 1041, the income-tax return for trusts and estates. Whatever date you set for the end of the first tax year, that will be the date you use for future tax returns too, assuming the trust is set up to last a

Since I did not file the short year 1041 for 2013, is it considered late and therefore subject to penalties? Is there any way to avoid these penalties?==========>>>>>>>>>>>>> The IRS requires trusts that earn more than $600 of gross income or any amount of taxable income during the year to file Form 1041 as well, regardless of whether the grantor is deceased. If a grantor is deceased and the trustee has elected to make the trust part of the estate for tax purposes, the estate's executor must include any income earned by the trust on Form 1041 as well. Otherwise, the trust must file separately. The IRS imposes penalties for underpaid taxes and late returns. For each month that a tax return is late, the IRS assesses a penalty equal to 5 percent of the tax due, up to a maximum penalty of 25 percent. The IRS also charges interest on unpaid tax. If the executor failed to pay enough estimated tax during the year, the IRS may charge an additional penalty. To avoid a penalty for underpayment of estimated tax, estates must pay estimated tax equal to 90 percent of the current year's liability or 100 percent of the previous year's liability, whichever is smaller.please contact the IRS for more info in detail.



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Old 05-28-2014, 12:44 PM
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Thanks, if I file on a fiscal year basis how does that work since 1099s are sent out on a calender year basis. For example, if the trust receives a 1099 for year 2014 but the trust is filing on a fiscal year that only covers part of 2014 then how do I allocate that income to be reported on the 1041? Also, is there a directory that you know of that I can find an EA in my area who knows this area of the tax law?



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Old 05-28-2014, 05:35 PM
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Thanks, if I file on a fiscal year basis how does that work since 1099s are sent out on a calender year basis. For example, if the trust receives a 1099 for year 2014 but the trust is filing on a fiscal year that only covers part of 2014 then how do I allocate that income to be reported on the 1041? Also, is there a directory that you know of that I can find an EA in my area who knows this area of the tax law?
Thanks, if I file on a fiscal year basis how does that work since 1099s are sent out on a calender year basis. For example, if the trust receives a 1099 for year 2014 but the trust is filing on a fiscal year that only covers part of 2014 then how do I allocate that income to be reported on the 1041? =================>>>>>>>in general as you can see, Individuals are typically calendar-year taxpayers. The trust's taxable year is determined based on the type of trust. IRSrequires that the taxable year for all trusts is the calendar year.The trust that is a calendar year trust must file tax return by April 15th. I guess ,however, instead of using a calendar year end, a fiscal year end can be chosen by a trust. For example if the individual died June 17, 2013, the tax return fiscal year end can be June 17, 2013 through May 31, 2014. (It can't be longer than 12 months). Thais allows relatively small or less complicated trust to file its 1041. In the two years following the death of the grantor,a trustee may choose to operate the trust as a fiscal year trust. This means that you can begin your accounting year on the first day of the month of the grantor's death.As said above, if you choose a fiscal year, your tax return is due on the 15th day of the fourth month following the close of the fiscal year. For example, if the grantor dies on October 12th, your fiscal year would be October 1 through September 30, and your tax return would be due on the following January 15th.




Also, is there a directory that you know of that I can find an EA in my area who knows this area of the tax law?==========>>>>>>>>Sorry no idea I guess you can contact association of EA in your area or NAEA to find an IRS EA in your area for more accurate info in detail.



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