Section references are to the Internal Revenue Code unless otherwise noted.
For the latest information about developments related to Form 1041 and Schedules A, B, G, J, K-1 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form1041.
Due date of return.
Calendar year estates and trusts must file Form 1041 by April 15, 2024. If you live in Maine or Massachusetts, you have until April 17, 2024, because of the Patriots' Day and Emancipation Day holidays.
Capital gains and qualified dividends.
For tax year 2023, the 20% maximum capital gains rate applies to estates and trusts with income above $14,650. The 0% and 15% rates apply to certain threshold amounts. The 0% rate applies to amounts up to $3,000. The 15% rate applies to amounts over $3,000 and up to $14,650.
Bankruptcy estate filing threshold.
For tax year 2023, the requirement to file a return for a bankruptcy estate applies only if gross income is at least $13,850.
Qualified disability trust.
For tax year 2023, a qualified disability trust can claim an exemption of up to $4,700. This amount is not subject to phaseout.
Qualified sick and family leave credits.
Generally, the credits for qualified sick and family leave wages have expired. However, qualified sick and family leave wages paid in 2023 for leave taken before April 1, 2021, and for leave taken after March 31, 2021, and before October 1, 2021, may be eligible to claim the credits in 2023.
Form 8978 Worksheet.
A Form 8978 Worksheet—Schedule G, Part I, Line 8 has been added to the instructions to calculate the amount due when there is a negative amount from Form 8978, line 14, that was not used to reduce Schedule G, line 3, to zero, and you have chapter 1 taxes and/or tax and interest from Form 8621.
Advanced manufacturing production credit.
Section 13502 of the Inflation Reduction Act of 2022 (IRA 2022) created the advanced manufacturing production credit for certain components produced and sold after 2022. See Form 7207, Advanced Manufacturing Production Credit, and its instructions and section 45X.
Net operating loss (NOL) carryback.
Generally, an NOL arising in a tax year beginning in 2021 or later may not be carried back and instead must be carried forward indefinitely. However, farming losses arising in tax years beginning in 2021 or later may be carried back 2 years and carried forward indefinitely.
For special rules for NOLs arising in 2018, 2019 or 2020, see Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, for more information.
Section 965.
Section 965(a) inclusion amounts are not applicable for tax year 2021 and later years. However, section 965 may still apply to certain estates and trusts (including the S portion of electing small business trusts (ESBTs)) where a section 965(h) or section 965(i) election has been made.
Section 1061 reporting.
Section 1061 recharacterizes certain long-term capital gains of applicable partnership interests held by an estate or trust as short-term capital gains. See Section 1061 Reporting Guidance FAQs.
Excess deductions on termination.
Under Final Regulations - TD9918, each excess deduction on termination of an estate or trust retains its separate character as an amount allowed in arriving at adjusted gross income (AGI), a non-miscellaneous itemized deduction, or a miscellaneous itemized deduction.
Qualified Opportunity Investment.
With the exception of grantor trusts, if you held a qualified investment in a qualified opportunity fund (QOF) at any time during the year, you must file your return with Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, attached to your return. For more information, see Form 8997 and its instructions.
Extension of time to file.
The extension of time to file an estate (other than a bankruptcy estate) or trust return is 5½ months.
Item A. Type of entity.
On page 1 of Form 1041, item A, taxpayers should select more than one box, when appropriate, to reflect the type of entity.
Item F. Net operating loss (NOL) carryback.
If an amended return is filed for an NOL carryback, check the Net operating loss carryback box in item F. See Amended Return , later, for complete information.
Item G. Section 645 election.
If the estate has made a section 645 election, the executor must check item G and provide the taxpayer identification number (TIN) of the electing trust with the highest total asset value in the box provided.
The executor must also attach a statement to Form 1041 providing the following information for each electing trust (including the electing trust provided in item G): (a) the name of the electing trust, (b) the TIN of the electing trust, and (c) the name and address of the trustee of the electing trust.
Form 1041 e-filing .
When e-filing Form 1041, use either Form 8453-FE, U.S. Estate or Trust Declaration for an IRS e-file Return, or Form 8879-F, IRS e-file Signature Authorization for Form 1041.
Note. Form 8879-F can only be associated with a single Form 1041. Form 8879-F can no longer be used with multiple Forms 1041.
For more information about e-filing returns through MeF, see Pub. 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters.
The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS strives to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.
The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.
TAS can help you resolve problems that you can't resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:
TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to TAS at IRS.gov/SAMS. Be sure to not include any personal taxpayer information.
Internet. You can access the IRS website 24 hours a day, 7 days a week, at IRS.gov to:
Tax forms and publications.
The estate or trust can download or print all of the forms and publications it may need on IRS.gov/FormsPubs. Otherwise, the estate or trust can go to IRS.gov/OrderForms to place an order and have forms mailed to it. The IRS will process your order for forms and publications as soon as possible.
The fiduciary of a domestic decedent's estate, trust, or bankruptcy estate uses Form 1041 to report:
A trust or a decedent's estate is a separate legal entity for federal tax purposes. A decedent's estate comes into existence at the time of death of an individual. A trust may be created during an individual's life (inter vivos) or at the time of their death under a will (testamentary). If the trust instrument contains certain provisions, then the person creating the trust (the grantor) is treated as the owner of the trust's assets. Such a trust is a grantor type trust. See Grantor Type Trusts , later, under Special Reporting Instructions.
A trust or decedent's estate figures its gross income in much the same manner as an individual. Most deductions and credits allowed to individuals are also allowed to estates and trusts. However, there is one major distinction. A trust or decedent's estate is allowed an income distribution deduction for distributions to beneficiaries. To figure this deduction, the fiduciary must complete Schedule B. The income distribution deduction determines the amount of any distributions taxed to the beneficiaries.
For this reason, a trust or decedent's estate is sometimes referred to as a “pass-through entity.” The beneficiary, and not the trust or decedent's estate, pays income tax on their distributive share of income. Schedule K-1 (Form 1041) is used to notify the beneficiaries of the amounts to be included on their income tax returns.
Before preparing Form 1041, the fiduciary must figure the accounting income of the estate or trust under the will or trust instrument and applicable local law to determine the amount, if any, of income that is required to be distributed, because the income distribution deduction is based, in part, on that amount.
Certain trust arrangements claim to reduce or eliminate federal taxes in ways that are not permitted under the law. Abusive trust arrangements are typically promoted by the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. The promised benefits may include reduction or elimination of income subject to tax; deductions for personal expenses paid by the trust; depreciation deductions of an owner's personal residence and furnishings; a stepped-up basis for property transferred to the trust; the reduction or elimination of self-employment taxes; and the reduction or elimination of gift and estate taxes. These promised benefits are inconsistent with the tax rules applicable to trust arrangements.
Abusive trust arrangements often use trusts to hide the true ownership of assets and income or to disguise the substance of transactions. These arrangements frequently involve more than one trust, each holding different assets of the taxpayer (for example, the taxpayer's business, business equipment, home, automobile, etc.). Some trusts may hold interests in other trusts, purport to involve charities, or are foreign trusts. Funds may flow from one trust to another trust by way of rental agreements, fees for services, purchase agreements, and distributions.
Some of the abusive trust arrangements that have been identified include unincorporated business trusts (or organizations), equipment or service trusts, family residence trusts, charitable trusts, and final trusts. In each of these trusts, the original owner of the assets nominally subject to the trust effectively retains the authority to cause financial benefits of the trust to be directly or indirectly returned or made available to the owner. For example, the trustee may be the promoter, a relative, or a friend of the owner who simply carries out the directions of the owner whether or not permitted by the terms of the trust.
When trusts are used for legitimate business, family, or estate planning purposes, either the trust, the beneficiary, or the transferor of assets to the trust will pay the tax on income generated by the trust property. Trusts can't be used to transform a taxpayer's personal, living, or educational expenses into deductible items, and can't seek to avoid tax liability by ignoring either the true ownership of income and assets or the true substance of transactions. Therefore, the tax results promised by the promoters of abusive trust arrangements are not allowable under the law, and the participants in and promoters of these arrangements may be subject to civil or criminal penalties in appropriate cases.
For more details, including the legal principles that control the proper tax treatment of these abusive trust arrangements, see Notice 97-24, 1997-1 C.B. 409.
For additional information about abusive tax arrangements, go to IRS.gov and type “Abusive Trusts” in the search box.
Adjusted gross income (AGI).
Compute the AGI of an estate or a non-grantor trust by subtracting the following from total income on line 9 of page 1.
Compute the AGI of the S portion of an ESBT in the same manner as an individual taxpayer, except that administration costs allocable to the S portion (to the extent they are costs incurred in the administration of the trust that wouldn't have been incurred if the property were not held by the estate or trust) shall be deducted in arriving at AGI.
Beneficiary.
A beneficiary includes an heir, a legatee, or a devisee.
Decedent's estate.
The decedent's estate is an entity that is formed at the time of an individual's death and is generally charged with gathering the decedent's assets, paying the decedent's debts and expenses, and distributing the remaining assets. Generally, the estate consists of all the property, real or personal, tangible or intangible, wherever situated, that the decedent owned an interest in at death.
Distributable net income (DNI).
The income distribution deduction allowable to estates and trusts for amounts paid, credited, or required to be distributed to beneficiaries is limited to DNI. This amount, which is figured on Schedule B, line 7, is also used to determine how much of an amount paid, credited, or required to be distributed to a beneficiary will be includible in their gross income.
Income in respect of a decedent (IRD).
When completing Form 1041, you must take into account any items that are IRD.
In general, IRD is income that a decedent was entitled to receive but that was not properly includible in the decedent's final income tax return under the decedent's method of accounting.
Some examples of IRD for a decedent who kept their books on the cash method are:
The IRD has the same character it would have had if the decedent had lived and received such amount.
The following deductions and credits, when paid by the decedent's estate, are allowed on Form 1041 even though they were not allowable on the decedent's final income tax return.
For more information on IRD, see section 691 andPub. 559, Survivors, Executors, and Administrators.
Income required to be distributed currently.
Income required to be distributed currently is income that is required under the terms of the governing instrument and applicable local law to be distributed in the year it is received. The fiduciary must be under a duty to distribute the income currently, even if the actual distribution is not made until after the close of the trust's tax year. See Regulations section 1.651(a)-2.
Fiduciary.
A fiduciary is a trustee of a trust, or an executor, executrix, administrator, administratrix, personal representative, or person in possession of property of a decedent's estate.
Any reference in these instructions to “you” means the fiduciary of the estate or trust.
Trust.
A trust is an arrangement created either by a will or by an inter vivos declaration by which trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts.
Revocable living trust.
A revocable living trust is an arrangement created by a written agreement or declaration during the life of an individual and can be changed or ended at any time during the individual's life. A revocable living trust is generally created to manage and distribute property. Many people use this type of trust instead of (or in addition to) a will.
Because this type of trust is revocable, it is treated as a grantor type trust for tax purposes. See Grantor Type Trusts under Special Reporting Instructions , later, for special filing instructions that apply to grantor trusts.
Be sure to read Optional Filing Methods for Certain Grantor Type Trusts, later. Generally, most people that have revocable living trusts will be able to use Optional Method 1. This method is the easiest and least burdensome way to meet your obligations.
The fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic estate that has:
An estate is a domestic estate if it isn't a foreign estate. A foreign estate is one the income of which is from sources outside the United States that isn't effectively connected with the conduct of a U.S. trade or business and isn't includible in gross income. If you are the fiduciary of a foreign estate, file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, instead of Form 1041.
The fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic trust taxable under section 641 that has:
Two or more trusts are treated as one trust if the trusts have substantially the same grantor(s) and substantially the same primary beneficiary(ies) and a principal purpose of such trusts is avoidance of tax. This provision applies only to that portion of the trust that is attributable to contributions to corpus made after March 1, 1984.
A trust is a domestic trust if:
See Regulations section 301.7701-7 for more information on the court and control tests.
Also treated as a domestic trust is a trust (other than a trust treated as wholly owned by the grantor) that:
A trust that isn't a domestic trust is treated as a foreign trust. If you are the trustee of a foreign trust, file Form 1040-NR instead of Form 1041. Also, a foreign trust with a U.S. owner must generally file Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.
If a domestic trust becomes a foreign trust, it is treated under section 684 as having transferred all of its assets to a foreign trust, except to the extent a grantor or another person is treated as the owner of the trust when the trust becomes a foreign trust.
If all or any portion of a trust is a grantor type trust, then that trust or portion of a trust must follow the special reporting requirements discussed later under Special Reporting Instructions. See Grantor Type Trust under Specific Instructions , later, for more details on what makes a trust a grantor type trust.
A trust may be part grantor trust and part “other” type of trust, for example, simple or complex, or ESBT.
Qualified subchapter S trusts (QSSTs).
QSSTs must follow the special reporting requirements for these trusts, discussed later under Special Reporting Instructions .
Section 645 provides that if both the executor (if any) of an estate (the related estate) and the trustee of a qualified revocable trust (QRT) elect the treatment in section 645, the trust must be treated and taxed as part of the related estate during the election period. This election may be made by a QRT even if no executor is appointed for the related estate.
In general, Form 8855, Election To Treat a Qualified Revocable Trust as Part of an Estate, must be filed by the due date for Form 1041 for the first tax year of the related estate. This applies even if the combined related estate and electing trust don't have sufficient income to be required to file Form 1041. However, if the estate is granted an extension of time to file Form 1041 for its first tax year, the due date for Form 8855 is the extended due date.
Once made, the election is irrevocable.
Qualified revocable trusts (QRTs).
In general, a QRT is any trust (or part of a trust) that, on the day the decedent died, was treated as owned by the decedent because the decedent held the power to revoke the trust as described in section 676. An electing trust is a QRT for which a section 645 election has been made.
Election period.
The election period is the period of time during which an electing trust is treated as part of its related estate.
The election period begins on the date of the decedent's death and terminates on the earlier of:
To determine the applicable date, first determine whether a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is required to be filed as a result of the decedent's death. If no Form 706 is required to be filed, the applicable date is 2 years after the date of the decedent's death. If Form 706 is required, the applicable date is the later of 2 years after the date of the decedent's death or 6 months after the final determination of liability for estate tax. For additional information, see Regulations section 1.645-1(f).
Taxpayer identification number (TIN).
All QRTs must obtain a new TIN following the death of the decedent whether or not a section 645 election is made. (Use Form W-9, Request for Taxpayer Identification Number and Certification, to notify payers of the new TIN.)
An electing trust that continues after the termination of the election period doesn't need to obtain a new TIN following the termination unless:
A related estate that continues after the termination of the election period doesn't need to obtain a new TIN.
For more information about TINs, including trusts with multiple owners, see Regulations sections 1.645-1 and 301.6109-1(a).
General procedures for completing Form 1041 during the election period.
If there is an executor. The following rules apply to filing Form 1041 while the election is in effect.
For additional information, including treatment of transfers between shares and charitable contribution deductions, see Regulations section 1.645-1(e).
If no executor has been appointed for the related estate, the trustee of the electing trust files Form 1041 as if it were an estate. File using the TIN that the QRT obtained after the death of the decedent. The trustee can choose a fiscal year as the trust's tax year during the election period. Be sure to check the “Decedent's estate” box at the top of Form 1041 and item G if the filing trust has made a section 645 election. For item G, the filing trustee must provide the TIN of the electing trust with the highest total asset value. The electing trust is entitled to a single $600 personal exemption on returns filed for the election period.
If there is more than one electing trust, the trusts must appoint one trustee as the filing trustee. Form 1041 is filed under the name and TIN of the filing trustee's trust. A statement providing the same information about the electing trusts (except the filing trust) that is listed under If there is an executor above must be attached to these Forms 1041. All electing trusts must choose the same tax year.
If there is more than one electing trust, the filing trustee is responsible for ensuring that the filing trust's share of the combined tax liability is paid.
For additional information on filing requirements when there is no executor, including application of the separate share rule, see Regulations section 1.645-1(e). For information on the requirements when an executor is appointed after an election is made and the executor doesn't agree to the election, see later.
When there is an executor (or there isn't an executor and the trustee isn't the filing trustee), the trustee of an electing trust is responsible for the following during the election period.
The trustee does not file a Form 1041 during the election period (except for a final return if the trust terminates during the election period, as explained later).
Procedure for completing Form 1041 for the year in which the election terminates.
If there is an executor. If there is an executor, the Form 1041 filed under the name and TIN of the related estate for the tax year in which the election terminates includes (a) the items of income, deduction, and credit for the related estate for its entire tax year; and (b) the income, deductions, and credits for the electing trust for the period that ends with the last day of the election period. If the estate won't continue after the close of the tax year, indicate that this Form 1041 is a final return.
At the end of the last day of the election period, the combined entity is deemed to distribute the share comprising the electing trust to a new trust. All items of income, including net capital gains, that are attributable to the share comprising the electing trust are included in the calculation of DNI of the electing trust and treated as distributed. The distribution rules of sections 661 and 662 apply to this deemed distribution. The combined entity is entitled to an income distribution deduction for this deemed distribution, and the "new" trust must include its share of the distribution in its income. See Regulations sections 1.645-1(e)(2)(iii) and 1.645-1(h) for more information.
If the electing trust continues in existence after the termination of the election period, the trustee must file Form 1041 under the name and TIN of the trust, using the calendar year as its accounting period, if it is otherwise required to file.
If there isn't an executor, the following rules apply to filing Form 1041 for the tax year in which the election period ends.
In addition to the requirements listed above under this same heading, the trustee is responsible for the following.
Special filing instructions.
If the section 645 election hasn't been made by the time the QRT's first income tax return would be due for the tax year beginning with the decedent's death, but the trustee and executor (if any) have decided to make a section 645 election, then the QRT isn't required to file a Form 1041 for the short tax year beginning with the decedent's death and ending on December 31 of that year. However, if a valid election isn't subsequently made, the QRT may be subject to penalties and interest for failure to file and failure to pay.
If the QRT files a Form 1041 for this short period, and a valid section 645 election is subsequently made, then the trustee must file an amended Form 1041 for the electing trust, excluding all items of income, deduction, and credit of the electing trust. These amounts are then included on the first Form 1041 filed by the executor for the related estate (or the filing trustee for the electing trust filing as an estate).
If an executor for the related estate isn't appointed until after the trustee has made a valid section 645 election, the executor must agree to the trustee's election and they must file a revised Form 8855 within 90 days of the appointment of the executor. If the executor doesn't agree to the election, the election terminates as of the date of appointment of the executor.
If the executor agrees to the election, the trustee must amend any Form 1041 filed under the name and TIN of the electing trust for the period beginning with the decedent's death. The amended returns are still filed under the name and TIN of the electing trust, and they must include the items of income, deduction, and credit for the related estate for the periods covered by the returns. Also, attach a statement to the amended Forms 1041 identifying the name and TIN of the related estate, and the name and address of the executor. Check the “Final return” box on the amended return for the tax year that ends with the appointment of the executor. Except for this amended return, all returns filed for the combined entity after the appointment of the executor must be filed under the name and TIN of the related estate.
If the election terminates as the result of a later appointed executor, the executor of the related estate must file Forms 1041 under the name and TIN of the related estate for all tax years of the related estate beginning with the decedent's death. The electing trust's election period and tax year terminate the day before the appointment of the executor. The trustee isn't required to amend any of the returns filed by the electing trust for the period prior to the appointment of the executor. The trust must file a final Form 1041 following the instructions above for completing Form 1041 in the year in which the election terminates and there is no executor.
If an electing trust terminates during the election period, the trustee of that trust must file a final Form 1041 by completing the entity information (using the trust's EIN), checking the Final return box, and signing and dating the form. Don't report items of income, deduction, and credit. These items are reported on the related estate's return.
The trustee of an Alaska Native Settlement Trust may elect the special tax treatment for the trust and its beneficiaries provided for in section 646. The election must be made by the due date (including extensions) for filing the trust's tax return for its first tax year ending after June 7, 2001. Don't use Form 1041. Use Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, to make the election. Additionally, Form 1041-N is the trust's income tax return and satisfies the section 6039H information reporting requirement for the trust.
The bankruptcy trustee or debtor-in-possession must file Form 1041 for the estate of an individual involved in bankruptcy proceedings under chapter 7 or 11 of title 11 of the U.S. Code if the estate has gross income for the tax year of $13,850 or more. See Bankruptcy Estates , later, for details.
A section 664 CRT doesn’t file Form 1041. Instead, a CRT files Form 5227, Split-Interest Trust Information Return. If the CRT has any unrelated business taxable income, it must also file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.
Don't file Form 1041 for a common trust fund maintained by a bank. Instead, the fund may use Form 1065, U.S. Return of Partnership Income, for its return. For more details, see section 584 and Regulations section 1.6032-1.
ESBTs file Form 1041. However, see Electing Small Business Trusts (ESBTs) , later, for a discussion of the special reporting requirements for these trusts.
Pooled income funds file Form 1041. See Pooled Income Funds , later, for the special reporting requirements for these trusts. Additionally, pooled income funds must file Form 5227.
Trustees of pre-need funeral trusts who elect treatment under section 685 file Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts. All other pre-need funeral trusts, see Grantor Type Trusts , later, for Form 1041 reporting requirements.
The trustee of a designated or qualified settlement fund (QSF) must generally file Form 1120-SF, U.S. Income Tax Return for Settlement Funds, instead of Form 1041.
Special election.
If a QSF has only one transferor, the transferor may elect to treat the QSF as a grantor type trust.
To make the grantor trust election, the transferor must attach an election statement to a timely filed Form 1041, including extensions, that the administrator files for the QSF for the tax year in which the settlement fund is established. If Form 1041 isn't filed because Optional Method 1 or 2 (described later) was chosen, attach the election statement to a timely filed income tax return, including extensions, of the transferor for the tax year in which the settlement fund is established.
The election statement may be made separately or, if filed with Form 1041, on the attachment described under Grantor Type Trusts , later. At the top of the election statement, enter “Section 1.468B-1(k) Election” and include the transferor's:
Trustees and middlemen of WHFITs don't file Form 1041. Instead, they report all items of gross income and proceeds on the appropriate Form 1099. For the definition of a WHFIT, see Regulations section 1.671-5(b)(22). A tax information statement that includes the information given to the IRS on Forms 1099, as well as additional information identified in Regulations section 1.671-5(e), must be given to trust interest holders. See the General Instructions for Certain Information Returns for more information.
Qualified fiduciaries or transmitters may be able to file Form 1041 and related schedules electronically. To become an e-file provider, complete the following steps.
The online application process takes 4–6 weeks to complete.
Existing e-file providers must now use e -Services to make account updates.
Help is available online at e-services or through the e-Help Desk at 866-255-0654 (512-416-7750 for international calls), Monday through Friday, 6:30 a.m.–6:00 p.m. (Central time). Frequently asked questions and Online Tutorials are available to answer questions or to guide users through the application process.
If you file Form 1041 electronically, you may sign the return electronically by using a personal identification number (PIN). See Form 8879-F for details.
Form 8879-F can only be associated with a single Form 1041. Form 8879-F can't be used with multiple Forms 1041.
Form 1041 may also be e-filed using Form 8453-FE.
For more information about e-filing returns through MeF, see Pub. 4164.
If Form 1041 is e-filed and there is a balance due, the fiduciary may authorize an electronic funds withdrawal with the return.
You can use certain PDSs designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. Go to IRS.gov/PDS for the current list of designated services.
The PDS can tell you how to get written proof of the mailing date.
For the IRS mailing address to use if you’re using a PDS, go to IRS.gov/PDSstreetAddresses.
PDSs can't deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.
For calendar year estates and trusts, file Form 1041 and Schedule(s) K-1 by April 15, 2024 . If you live in Maine or Massachusetts, you have until April 17, 2024, because of the Patriots' Day and Emancipation Day holidays.
For fiscal year estates and trusts, file Form 1041 by the 15th day of the 4th month following the close of the tax year. For example, an estate that has a tax year that ends on June 30, 2024, must file Form 1041 by October 15, 2024. If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day.
If more time is needed to file the estate or trust return, use Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to apply for an automatic 5½-month extension of time to file.
File the 2023 return for calendar year 2023 and fiscal years beginning in 2023 and ending in 2024. If the return is for a fiscal year or a short tax year (less than 12 months), fill in the tax year space at the top of the form.
The 2023 Form 1041 may also be used for a tax year beginning in 2024 if:
For all estates and trusts, including charitable and split-interest trusts (other than CRTs).
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The fiduciary, or an authorized representative, must sign Form 1041. If there are joint fiduciaries, only one is required to sign the return.
A financial institution that submitted estimated tax payments for trusts for which it is the trustee must enter its EIN in the space provided for the EIN of the fiduciary. Don't enter the EIN of the trust. For this purpose, a financial institution is one that maintains a Treasury Tax and Loan (TT&L) account. If you are an attorney or other individual functioning in a fiduciary capacity, leave this space blank. Don't enter your individual social security number (SSN).
Generally, anyone who is paid to prepare a tax return must have a Preparer Tax Identification Number (PTIN), sign the return, and fill in the other blanks in the Paid Preparer Use Only area of the return.
The person required to sign the return must:
If you, as fiduciary, fill in Form 1041, leave the Paid Preparer Use Only space blank.
If someone prepares this return and doesn't charge you, that person should not sign the return.
If the fiduciary wants to allow the IRS to discuss the estate's or trust's 2023 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the Paid Preparer Use Only area of the estate's or trust's return. It doesn't apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the fiduciary is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of the estate's or trust's return. The fiduciary is also authorizing the paid preparer to:
The fiduciary isn't authorizing the paid preparer to receive any refund check, bind the estate or trust to anything (including any additional tax liability), or otherwise represent the estate or trust before the IRS.
The authorization will automatically end no later than the due date (without regard to extensions) for filing the estate's or trust's 2024 tax return. If the fiduciary wants to expand the paid preparer's authorization or revoke the authorization before it ends, see Pub. 947, Practice Before the IRS and Power of Attorney.
Figure taxable income using the method of accounting regularly used in keeping the estate's or trust's books and records. Generally, permissible methods include the cash method, the accrual method, or any other method authorized by the Internal Revenue Code. In all cases, the method used must clearly reflect income.
Generally, the estate or trust may change its accounting method (for income as a whole or for any material item) only by getting consent on Form 3115, Application for Change in Accounting Method. For more information, see Pub. 538, Accounting Periods and Methods.
For a decedent's estate, the moment of death determines the end of the decedent's tax year and the beginning of the estate's tax year. As executor or administrator, you choose the estate's tax period when you file its first income tax return. The estate's first tax year may be any period of 12 months or less that ends on the last day of a month. If you select the last day of any month other than December, you are adopting a fiscal tax year.
To change the accounting period of an estate, use Form 1128, Application To Adopt, Change, or Retain a Tax Year.
Generally, a trust must adopt a calendar year. The following trusts are exempt from this requirement.
You may round off cents to whole dollars on the estate's or trust's return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.
If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.
If you are entering amounts that include cents, make sure to include the decimal point. There is no cents column on the form.
Generally, an estate or trust must pay estimated income tax for 2024 if it expects to owe, after subtracting any withholding and credits, at least $1,000 in tax, and it expects the withholding and credits to be less than the smaller of:
However, if a return was not filed for 2023 or that return didn't cover a full 12 months, item 2 doesn't apply.
For this purpose, include household employment taxes in the tax shown on the tax return, but only if either of the following is true.
Estimated tax payments aren't required from:
For more information, see Form 1041-ES, Estimated Income Tax for Estates and Trusts.
A financial institution that has been designated as an authorized federal tax depository, and acts as a fiduciary for at least 200 taxable trusts that are required to pay estimated tax, is required to deposit the estimated tax payments electronically using the Electronic Federal Tax Payment System (EFTPS).
A fiduciary that isn't required to make electronic deposits of estimated tax on behalf of a trust or an estate may voluntarily participate in EFTPS. To enroll in or get more information about EFTPS, go to EFTPS.gov or call 800-555-4477. To contact EFTPS using Telecommunications Relay Services (TRS) for people who are deaf, hard of hearing, or have a speech disability, dial 711 and then provide the TRS assistant the 800-555-4477 number above or 800-733-4829. Also, see Pub. 966, Electronic Federal Tax Payment System: A Guide to Getting Started.
Depositing on time.
For a deposit using EFTPS to be on time, the deposit must be submitted by 8:00 p.m. Eastern time the day before the due date of the deposit.
Fiduciaries of trusts that pay estimated tax may elect under section 643(g) to have any portion of their estimated tax payments allocated to any of the beneficiaries.
The fiduciary of a decedent's estate may make a section 643(g) election only for the final year of the estate.
Make the election by filing Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries, by the 65th day after the close of the estate's or trust's tax year. Then, include that amount in box 13, code A, of Schedule K-1 (Form 1041) for any beneficiaries for whom it was elected.
If Form 1041-T was timely filed, the payments are treated as paid or credited to the beneficiary on the last day of the tax year and must be included as an other amount paid, credited, or required to be distributed on Form 1041, Schedule B, line 10. See the instructions for Schedule B, line 10, later.
Failure to make a timely election will result in the estimated tax payments not being transferred to the beneficiary(ies) even if you entered the amount on Schedule K-1.
See the instructions for Schedule G, Part II, line 11, for more details.
Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted.
Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements. Interest is charged on the penalty from the due date of the return (including extensions). The interest charge is figured at a rate determined under section 6621.
The law provides a penalty of 5% of the tax due for each month, or part of a month, for which a return isn't filed up to a maximum of 25% of the tax due (15% for each month, or part of a month, up to a maximum of 75% if the failure to file is fraudulent). If the return is more than 60 days late, the minimum penalty is the smaller of $485 or the tax due.
The penalty won't be imposed if you can show that the failure to file on time was due to reasonable cause. If you receive a notice about penalty and interest after you file this return, send us an explanation and we will determine if you meet reasonable-cause criteria. Don't attach an explanation when you file Form 1041.
Generally, the penalty for not paying tax when due is ½ of 1% of the unpaid amount for each month or part of a month it remains unpaid. The maximum penalty is 25% of the unpaid amount. The penalty applies to any unpaid tax on the return. Any penalty is in addition to interest charges on late payments.
If you include interest on either of these penalties with your payment, identify and enter these amounts in the bottom margin of Form 1041, page 1. Don't include the interest or penalty amount in the balance of tax due on line 28.
You must provide Schedule K-1 (Form 1041), on or before the day you are required to file Form 1041, to each beneficiary who receives a distribution of property or an allocation of an item of the estate.
For each failure to provide Schedule K-1 to a beneficiary when due and each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information), a $310 penalty may be imposed with regard to each Schedule K-1 for which a failure occurs. The maximum penalty is $3,783,000 for all such failures during a calendar year. If the requirement to report information is intentionally disregarded, each $310 penalty is increased to $630 or, if greater, 10% of the aggregate amount of items required to be reported, and no maximum penalty applies.
The penalty won't be imposed if the fiduciary can show that not providing information timely and correctly was due to reasonable cause and not due to willful neglect.
If the fiduciary underpaid estimated tax, use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to figure any penalty. Enter the amount of any penalty on Form 1041, line 27.
This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld aren't collected or withheld, or these taxes aren't paid. These taxes are generally reported on Forms 720, 941, 943, 944, or 945. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax. See the Instructions for Form 720; Pub. 15 (Circular E), Employer's Tax Guide; or Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for more details, including the definition of responsible persons.
Other penalties can be imposed for negligence, substantial understatement of tax, and fraud. See Pub. 17, Your Federal Income Tax, for details on these penalties.
Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements.
Form 56, Notice Concerning Fiduciary Relationship. You must notify the IRS of the creation or termination of a fiduciary relationship. You may use Form 56 to provide this notice to the IRS.
Form 461, Limitation on Business Losses.
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return; or Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States.
Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions.
Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust.
Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations.
Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
Form 720, Quarterly Federal Excise Tax Return. Use Form 720 to report environmental excise taxes, communications and air transportation taxes, fuel taxes, luxury tax on passenger vehicles, manufacturers' taxes, ship passenger tax, and certain other excise taxes.
See Trust Fund Recovery Penalty, earlier.
Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Use this form to report certain information required under section 6038B.
Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. The estate or trust may be liable for FUTA tax and may have to file Form 940 if it paid wages of $1,500 or more in any calendar quarter during the calendar year (or the preceding calendar year) or one or more employees worked for the estate or trust for some part of a day in any 20 different weeks during the calendar year (or the preceding calendar year).
Form 941, Employer's QUARTERLY Federal Tax Return. Employers must file this form quarterly to report income tax withheld on wages and employer and employee social security and Medicare taxes. Certain small employers must file Form 944, Employer's ANNUAL Federal Tax Return, instead of Form 941. For more information, see the Instructions for Form 944. Agricultural employers must file Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, instead of Form 941, to report income tax withheld and employer and employee social security and Medicare taxes on farmworkers.
See Trust Fund Recovery Penalty, earlier.
Form 945, Annual Return of Withheld Federal Income Tax. Use this form to report income tax withheld from nonpayroll payments, including pensions, annuities, IRAs, gambling winnings, and backup withholding.
See Trust Fund Recovery Penalty, earlier.
Form 965-A, Individual Report of Net 965 Tax Liability.
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).
Form 1040, U.S. Individual Income Tax Return.
Form 1040-NR, U.S. Nonresident Alien Income Tax Return.
Form 1040-SR, U.S. Tax Return for Seniors.
Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts.
Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons; and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. Use these forms to report and transmit withheld tax on payments or distributions made to nonresident alien individuals, foreign partnerships, or foreign corporations to the extent such payments or distributions constitute gross income from sources within the United States that isn't effectively connected with a U.S. trade or business. For more information, see sections 1441 and 1442, and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Forms 1099-A, B, INT, LTC, MISC, NEC, OID, Q, R, S, and SA. You may have to file these information returns to report acquisitions or abandonments of secured property; proceeds from broker and barter exchange transactions; interest payments; payments of long-term care and accelerated death benefits; miscellaneous income payments; nonemployee compensation; original issue discount; distributions from Coverdell ESAs; distributions from pensions, annuities, retirement or profit-sharing plans, IRAs (including SEPs, SIMPLEs, Roth IRAs, Roth Conversions, and IRA recharacterizations), insurance contracts, etc.; proceeds from real estate transactions; and distributions from an HSA, Archer MSA, or Medicare Advantage MSA.
Also, use certain of these returns to report amounts received as a nominee on behalf of another person, except amounts reported to beneficiaries on Schedule K-1 (Form 1041).
Form 8275, Disclosure Statement. File Form 8275 to disclose items or positions, except those contrary to a regulation, that are not otherwise adequately disclosed on a tax return. The disclosure is made to avoid parts of the accuracy-related penalty imposed for disregard of rules or substantial understatement of tax. Form 8275 is also used for disclosures relating to preparer penalties for understatements due to unrealistic positions or disregard of rules.
Form 8275-R, Regulation Disclosure Statement, is used to disclose any item on a tax return for which a position has been taken that is contrary to Treasury regulations.
Form 8288, U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons; and Form 8288-A, Statement of Withholding on Certain Dispositions by Foreign Persons. Use these forms to report and transmit withheld tax on the sale of U.S. real property by a foreign person. Also, use these forms to report and transmit tax withheld from amounts distributed to a foreign beneficiary from a “U.S. real property interest account” that a domestic estate or trust is required to establish under Regulations section 1.1445-5(c)(1)(iii).
Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Generally, this form is used to report the receipt of more than $10,000 in cash or foreign currency in one transaction (or a series of related transactions).
Form 8855, Election To Treat a Qualified Revocable Trust as Part of an Estate. This election allows a QRT to be treated and taxed (for income tax purposes) as part of its related estate during the election period.
Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. The estate or trust may have to file Form 8865 if it:
Also, the estate or trust may have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that foreign partnership if it was a partner at the time of the disposition.
For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions.
Form 8886, Reportable Transaction Disclosure Statement. Use Form 8886 to disclose information for each reportable transaction in which the trust participated, directly or indirectly. Form 8886 must be filed for each tax year that the federal income tax liability of the estate or trust is affected by its participation in the transaction. The estate or trust may have to pay a penalty if it has a requirement to file Form 8886 but you fail to file it. The following are reportable transactions.
See the Instructions for Form 8886 for more details and exceptions.
Form 8918, Material Advisor Disclosure Statement. Material advisors who provide material aid, assistance, or advice on organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and who directly or indirectly receive or expect to receive a minimum fee, must use Form 8918 to disclose any reportable transaction under Regulations section 301.6111-3. For more information, see Form 8918 and its instructions.
Form 8938, Statement of Specified Foreign Financial Assets.
Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts.
Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent.
Form 8975, Country-by-Country Report.
Schedule A (Form 8975), Tax Jurisdiction and Constituent Entity Information.
Form 8978, Partner's Additional Reporting Year Tax.
Form 8990, Limitation on Business Interest Expense Under Section 163(j).
Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income(GILTI).
Form 8995, Qualified Business Income Deduction Simplified Computation.
Form 8995-A, Qualified Business Income Deduction.
Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments.
The following publications may assist you in preparing Form 1041.
Assemble any schedules, forms, and attachments behind Form 1041 in the following order.
If you need more space on the forms or schedules, attach separate sheets. Use the same size and format as on the printed forms. But show the totals on the printed forms.
Attach these separate sheets after all the schedules and forms. Enter the estate's or trust's EIN on each sheet.
Don't file a copy of the decedent's will or the trust instrument unless the IRS requests it.
Grantor type trusts, the S portion of ESBTs, and bankruptcy estates all have reporting requirements that are significantly different than other subchapter J trusts and decedents’ estates. Additionally, grantor type trusts have optional filing methods available. Pooled income funds have many similar reporting requirements that other subchapter J trusts (other than grantor type trusts and ESBTs) have but there are some very important differences. These reporting differences and optional filing methods are discussed below by entity.
A trust is a grantor trust if the grantor retains certain powers or ownership benefits. This can also apply to only a portion of a trust. See Grantor Type Trust , later, for details on what makes a trust a grantor trust.
In general, a grantor trust is ignored for income tax purposes and all of the income, deductions, etc., are treated as belonging directly to the grantor. This also applies to any portion of a trust that is treated as a grantor trust.
If only a portion of the trust is a grantor type trust, indicate both grantor trust and the other type of trust, for example, simple or complex trust, as the type of entities checked in Section A on page 1 of Form 1041.
The following instructions apply only to grantor type trusts that are not using an optional filing method.
How to report.
If the entire trust is a grantor trust, fill in only the entity information of Form 1041. Don't show any dollar amounts on the form itself; show dollar amounts only on an attachment to the form. Don't use Schedule K-1 (Form 1041) as the attachment.
If only part of the trust is a grantor type trust, the portion of the income, deductions, etc., that is allocable to the non-grantor part of the trust is reported on Form 1041, under normal reporting rules. The amounts that are allocable directly to the grantor are shown only on an attachment to the form. Don't use Schedule K-1 (Form 1041) as the attachment. However, Schedule K-1 is used to reflect any income distributed from the portion of the trust that isn't taxable directly to the grantor or owner.
The fiduciary must give the grantor (owner) of the trust a copy of the attachment.
On the attachment, show:
The income taxable to the grantor or another person under sections 671 through 678 and the deductions and credits that apply to that income must be reported by that person on their own income tax return.
Example.
The John Doe Trust is a grantor type trust. During the year, the trust sold 100 shares of ABC stock for $1,010 in which it had a basis of $10 and 200 shares of XYZ stock for $10 in which it had a $1,020 basis.
The trust doesn't report these transactions on Form 1041. Instead, a schedule is attached to the Form 1041 showing each stock transaction separately and in the same detail as John Doe (grantor and owner) will need to report these transactions on his Form 8949, Sales and Other Dispositions of Capital Assets; and Schedule D (Form 1040). The trust doesn't net the capital gains and losses, nor does it issue John Doe a Schedule K-1 (Form 1041) showing a $10 long-term capital loss.
QSSTs.
Income allocated to S corporation stock held by the trust is treated as owned by the income beneficiary of the portion of the trust that owns the stock. Report this income following the rules discussed above for grantor type trusts. A QSST can't elect any of the optional filing methods discussed below.
However, the trust, and not the income beneficiary, is treated as the owner of the S corporation stock for figuring and attributing the tax results of a disposition of the stock. For example, if the disposition is a sale, the QSST election ends as to the stock sold, and any gain or loss recognized on the sale will be that of the trust. For more information on QSSTs, see Regulations section 1.1361-1(j).
Generally, if a trust is treated as owned by one grantor or other person, the trustee may choose Optional Method 1 or Optional Method 2 as the trust's method of reporting instead of filing Form 1041. Spouses will be treated as one grantor for purposes of these two optional methods if:
Generally, if a trust is treated as owned by two or more grantors or other persons, the trustee may choose Optional Method 3 as the trust's method of reporting instead of filing Form 1041.
Once you choose the trust's filing method, you must follow the rules under Changing filing methods , later, if you want to change to another method.
Exceptions.
The following trusts can't report using the optional filing methods.
Optional Method 1.
For a trust treated as owned by one grantor or by one other person, the trustee must give all payers of income during the tax year the name and TIN of the grantor or other person treated as the owner of the trust and the address of the trust. This method may be used only if the owner of the trust provides the trustee with a signed Form W-9. In addition, unless the grantor or other person treated as owner of the trust is the trustee or a co-trustee of the trust, the trustee must give the grantor or other person treated as owner of the trust a statement that:
Grantor trusts that haven't applied for an EIN and are going to file under Optional Method 1 don't need an EIN for the trust as long as they continue to report under that method.
Optional Method 2.
For a trust treated as owned by one grantor or by one other person, the trustee must give all payers of income during the tax year the name, address, and TIN of the trust. The trustee must also file with the IRS the appropriate Forms 1099 to report the income or gross proceeds paid to the trust during the tax year that show the trust as the payer and the grantor, or other person treated as owner, as the payee. The trustee must report each type of income in the aggregate and each item of gross proceeds separately. The due date for any Forms 1099 required to be filed with the IRS by a trustee under this method is February 28, 2024 (March 31, 2024, if filed electronically).
In addition, unless the grantor, or other person treated as owner of the trust, is the trustee or a co-trustee of the trust, the trustee must give the grantor or other person treated as owner of the trust a statement that:
Optional Method 3.
For a trust treated as owned by two or more grantors or other persons, the trustee must give all payers of income during the tax year the name, address, and TIN of the trust. The trustee must also file with the IRS the appropriate Forms 1099 to report the income or gross proceeds paid to the trust by all payers during the tax year attributable to the part of the trust treated as owned by each grantor, or other person, showing the trust as the payer and each grantor, or other person treated as owner of the trust, as the payee. The trustee must report each type of income in the aggregate and each item of gross proceeds separately. The due date for any Forms 1099 required to be filed with the IRS by a trustee under this method is February 28, 2024 (March 31, 2024, if filed electronically).
In addition, the trustee must give each grantor or other person treated as owner of the trust a statement that:
Changing filing methods.
A trustee who previously had filed Form 1041 can change to one of the optional methods by filing a final Form 1041 for the tax year that immediately precedes the first tax year for which the trustee elects to report under one of the optional methods. On the front of the final Form 1041, the trustee must enter “Pursuant to section 1.671-4(g), this is the final Form 1041 for this grantor trust,” and check the Final return box in item F.
For more details on changing reporting methods, including changes from one optional method to another, see Regulations section 1.671-4(g).
Backup withholding.
The following grantor trusts are treated as payors for purposes of backup withholding.
The trustee must withhold a certain percentage of reportable payments made to any grantor who is subject to backup withholding.
For more information, see section 3406 and its regulations.
If you are filing for a pooled income fund, attach a statement to support the following.
You don't have to complete Schedule A or B of Form 1041.
Also, you must file Form 5227 for the pooled income fund. However, if all amounts were transferred in trust before May 27, 1969, or if an amount was transferred to the trust after May 26, 1969, for which no deduction was allowed under any of the sections listed under section 4947(a)(2), then Form 5227 does not have to be filed.
Form 1041-A is no longer filed by pooled income funds.
Special rules apply when figuring the tax on the S portion of an ESBT. The S portion of an ESBT is the portion of the trust that consists of stock in one or more S corporations and isn't treated as a grantor type trust. The tax on the S portion:
The tax on the remainder (non-S portion) of the ESBT is figured in the normal manner on Form 1041.
Tax computation attachment.
Attach to the return the tax computation for the S portion of the ESBT.
If you need to complete and attach a tax form or worksheet for the S portion of the trust, enter “ESBT” in the top margin of the tax form, worksheet, or attachment.
To compute the tax on the S portion:
For additional information, see Regulations section 1.641(c)-1.
Other information.
When figuring the tax and DNI on the remaining (non-S) portion of the trust, disregard the S corporation items.
Don't apportion to the beneficiaries any of the S corporation items.
If the ESBT consists entirely of stock in one or more S corporations, don't make any entries on lines 1–23
of page 1. Instead:
The grantor portion (if any) of an ESBT will follow the rules discussed under Grantor Type Trusts , earlier.
The bankruptcy estate that is created when an individual debtor files a petition under either chapter 7 or 11 of title 11 of the U.S. Code is treated as a separate taxable entity. The bankruptcy estate is administered by a trustee or a debtor-in-possession. If the case is later dismissed by the bankruptcy court, the individual debtor is treated as if the bankruptcy petition had never been filed.
A separate taxable entity isn't created if a partnership or corporation files a petition under any chapter of title 11 of the U.S. Code.
For additional information about bankruptcy estates, see Pub. 908, Bankruptcy Tax Guide.
Every trustee (or debtor-in-possession) for an individual's bankruptcy estate under chapter 7 or 11 of title 11 of the U.S. Code must file a return if the bankruptcy estate has gross income of $13,850 or more for tax years beginning in 2023.
Failure to do so may result in an estimated Request for Administrative Expenses being filed by the IRS in the bankruptcy proceeding or a motion to compel filing of the return.
The filing of a tax return for the bankruptcy estate doesn't relieve the individual debtor(s) of their individual tax obligations.
Every bankruptcy estate of an individual required to file a return must have its own EIN. The SSN of the individual debtor can't be used as the EIN for the bankruptcy estate.
A bankruptcy estate is allowed to have a fiscal year. However, this period can't be longer than 12 months.
File Form 1041 on or before the 15th day of the 4th month following the close of the tax year. Use Form 7004 to apply for an automatic 6-month extension of time to file.
Under section 6103(e)(5), tax returns of individual debtors who have filed for bankruptcy under chapter 7 or 11 of title 11 are, upon written request, open to inspection by or disclosure to the trustee.
The returns subject to disclosure to the trustee are those for the year the bankruptcy begins and prior years. Use Form 4506, Request for Copy of Tax Return, to request copies of the individual debtor's tax returns.
If the bankruptcy case wasn't voluntary, disclosure can't be made before the bankruptcy court has entered an order for relief, unless the court rules that the disclosure is needed for determining whether relief should be ordered.
The bankruptcy estate succeeds to the following tax attributes of the individual debtor.
Under section 1398(c), the taxable income of the bankruptcy estate is generally figured in the same manner as that of an individual. The gross income of the bankruptcy estate includes any income included in property of the estate as defined in U.S. Code, title 11, sections 541, 1115, and 1186.
In certain chapter 11 cases, under section 1115 of title 11, property of the bankruptcy estate includes (a) earnings from services performed by the debtor after the beginning of the case (both wages and self-employment income) and before the case is closed, dismissed, or converted to a case under a different chapter; and (b) property described in section 541 of title 11 and income earned therefrom that the debtor acquires after the beginning of the case and before the case is closed, dismissed, or converted. If section 1115 of title 11 applies, the bankruptcy estate's gross income includes, as described above, (a) the debtor's earnings from services performed after the beginning of the case, and (b) the income from property acquired after the beginning of the case.
The income from property owned by the debtor when the case began is also included in the bankruptcy estate's gross income. However, if this property is exempted from the bankruptcy estate or is abandoned by the trustee or debtor-in-possession, the income from the property isn't included in the bankruptcy estate's gross income. Also included in income is gain from the sale of the bankruptcy estate's property. To figure gain, the trustee or debtor-in-possession must determine the correct basis of the property.
To determine whether any amount paid or incurred by the bankruptcy estate is allowable as a deduction or credit, or is treated as wages for employment tax purposes, treat the amount as if it were paid or incurred by the individual debtor in the same trade or business or other activity the debtor engaged in before the bankruptcy proceedings began.
Administrative expenses.
The bankruptcy estate is allowed a deduction for any administrative expense allowed under section 503 of title 11 of the U.S. Code, and any fee or charge assessed under chapter 123 of title 28 of the U.S. Code, to the extent not disallowed under an Internal Revenue Code provision (for example, section 263, 265, or 275).
Bankruptcy administrative expenses and fees, including accounting fees, attorney fees, and court costs, are deductible on Schedule 1 (Form 1040), Part II, line 24z, as allowable in arriving at AGI because they would not have been incurred if property had not been held by the bankruptcy estate. See section 67(e) and Final Regulations - TD9918.
Administrative expenses of the bankruptcy estate attributable to conducting a trade or business or for the production of estate rents or royalties are deductible in arriving at AGI on Form 1040, Schedules C, E, and F.
Administrative expense loss.
When figuring an NOL, nonbusiness deductions (including administrative expenses) are limited under section 172(d)(4) to the bankruptcy estate's nonbusiness income. The excess nonbusiness deductions are an administrative expense loss that may be carried back to each of the 3 preceding tax years and forward to each of the 7 succeeding tax years of the bankruptcy estate. The amount of an administrative expense loss that may be carried to any tax year is determined after the NOL deductions allowed for that year. An administrative expense loss is allowed only to the bankruptcy estate and can't be carried to any tax year of the individual debtor.
Carryback of NOLs and credits.
Generally, an NOL arising in a tax year beginning in 2021 or later may not be carried back and instead must be carried forward indefinitely. However, farming losses arising in tax years beginning in 2021 or later may be carried back 2 years and carried forward indefinitely. See Pub. 536 and Pub. 225, Farmer’s Tax Guide, for more information.
If the bankruptcy estate itself incurs an NOL (apart from losses carried forward to the estate from the individual debtor), it can carry back its NOLs not only to previous tax years of the bankruptcy estate, but also to tax years of the individual debtor prior to the year in which the bankruptcy proceedings began.
Excess credits, such as the foreign tax credit, may also be carried back to pre-bankruptcy years of the individual debtor.
Standard deduction.
A bankruptcy estate that doesn't itemize deductions is allowed a standard deduction of $13,850 for tax year 2023.
Discharge of indebtedness.
In a title 11 case, gross income doesn't include amounts that would normally be included in gross income resulting from the discharge of indebtedness. However, any amounts excluded from gross income must be applied to reduce certain tax attributes in a certain order. Attach Form 982 to show the reduction of tax attributes.
Figure the tax for the bankruptcy estate using the tax rate schedule below. Enter the tax on Form 1040 or 1040-SR, line 16.
| If taxable income is: | |||
| Over— | But not over— | The tax is: | Of the amount over— |
| $0 | $11,000 | 10% | $0 |
| 11,000 | 44,725 | $1,100.00 + 12% | 11,000 |
| 44,725 | 95,375 | 5,147.00 + 22% | 44,725 |
| 95,375 | 182,100 | 16,290.00 + 24% | 95,375 |
| 182,100 | 231,250 | 37,104.00 + 32% | 182,100 |
| 231,250 | 346,875 | 52,832.00 + 35% | 231,250 |
| 346,875 | . | 93,300.75 + 37% | 346,875 |
To request a prompt determination of the tax liability of the bankruptcy estate, the trustee or debtor-in-possession must file a written request for the determination with the IRS. The request must be submitted in duplicate and executed under penalties of perjury. The request must include a statement indicating that it is a request for prompt determination of tax liability and (a) the return type, and all the tax periods for which prompt determination is sought; (b) the name and location of the office where the return was filed; (c) the debtor's name; (d) the debtor's SSN, TIN, or EIN; (e) the type of bankruptcy estate; (f) the bankruptcy case number; and (g) the court where the bankruptcy is pending. Send the request to the Centralized Insolvency Operation, P.O. Box 7346, Philadelphia, PA 19101-7346 (marked “Request for Prompt Determination”).
The IRS will notify the trustee or debtor-in-possession within 60 days from receipt of the request if the return filed by the trustee or debtor-in-possession has been selected for examination or has been accepted as filed. If the return is selected for examination, it will be examined as soon as possible. The IRS will notify the trustee or debtor-in-possession of any tax due within 180 days from receipt of the request or within any additional time permitted by the bankruptcy court.
See Rev. Proc. 2006-24, 2006-22 I.R.B. 943, available at IRS.gov/irb/2006-22_IRB/ar12.html, modified by Announcement 2011-77, available at IRS.gov/irb/2011-51_IRB/ar13.
Use Form 1041 only as a transmittal for Form 1040 or 1040-SR. In the top margin of Form 1040 or 1040-SR, enter “Attachment to Form 1041. DO NOT DETACH.” Attach Form 1040 or 1040-SR to Form 1041. Complete only the identification area at the top of Form 1041. Enter the name of the individual debtor in the following format: “John Q. Public Bankruptcy Estate.” Beneath, enter the name of the trustee in the following format: “Avery Snow, Trustee.” In item D, enter the date the petition was filed or the date of conversion to a chapter 7 or 11 case.
Enter on Form 1041, line 24, the total tax from line 24 of Form 1040 or 1040-SR. Complete lines 25 through 30 of Form 1041, and sign and date it.
In a chapter 11 case, the bankruptcy estate's gross income may be affected by section 1115 or 1186 of title 11 of the U.S. Code. See Income, Deductions, and Credits , earlier. The debtor may receive a Form W-2, 1099-INT, 1099-DIV, 1099-MISC, or 1099-NEC or other information return reporting wages or other income to the debtor for the entire year, even though some or all of this income is includible in the bankruptcy estate's gross income under section 1115 of title 11 of the U.S. Code. If this happens, the income reported to the debtor on the Form W-2 or 1099, or other information return (and the withheld income tax shown on these forms) must be reasonably allocated between the debtor and the bankruptcy estate. The debtor-in-possession (or the chapter 11 trustee, if one was appointed) must attach a schedule that shows (a) all the income reported on the Form W-2, Form 1099, or other information return; (b) the portion of this income includible in the bankruptcy estate's gross income; and (c) all the withheld income tax, if any, and the portion of withheld tax reasonably allocated to the bankruptcy estate. Also, the debtor-in-possesion (or the chapter 11 trustee, if one was appointed) must attach a copy of the Form W-2, if any, issued to the debtor for the tax year if the Form W-2 reports wages to the debtor and some or all of the wages are includible in the bankruptcy estate's gross income because of section 1115 of title 11 of the U.S. Code. For more details, including acceptable allocation methods, see Notice 2006-83, 2006-40 I.R.B. 596, available at IRS.gov/irb/2006-40_IRB/ar12.html.
Copy the exact name of the estate or trust from the Form SS-4, Application for Employer Identification Number, that you used to apply for the EIN. If the name of the trust was changed during the tax year for which you are filing, enter the trust's new name and check the “Change in trust's name” box in item F.
If a grantor type trust (discussed later), enter the name, identification number, and address of the grantor(s) or other owner(s) in parentheses after the name of the trust.
Enter the name and title of the fiduciary. If the name entered is different from the name on the prior year's return, see Change in Fiduciary's Name and Change in Fiduciary , later.
Include the suite, room, or other unit number after the street address. If the post office doesn't deliver mail to the street address and the fiduciary has a P.O. box, show the box number instead.
If you want a third party (such as an accountant or an attorney) to receive mail for the estate or trust, enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.
If the estate or trust has had a change of address (including a change to an “in care of” name and address) and did not file Form 8822-B, Change of Address or Responsible Party — Business, check the Change in fiduciary's address box in item F.
If the estate or trust has a change of mailing address (including a new "in care of" name and address) or responsible party after filing its return, file Form 8822-B to notify the IRS of the change.
Check the appropriate box(es) that describes the entity for which you are filing the return.
In some cases, more than one box is checked. Check all boxes that apply to your trust. For example, if only a portion of a trust is a grantor type trust or if only a portion of an ESBT is the S portion, then more than one box is checked.
Determination of entity status is made on an annual basis.
There are special reporting requirements for grantor type trusts, pooled income funds, ESBTs, and bankruptcy estates. See Special Reporting Instructions, earlier.
An estate of a deceased person is a taxable entity separate from the decedent. It generally continues to exist until the final distribution of the assets of the estate is made to the heirs and other beneficiaries. The income earned from the property of the estate during the period of administration or settlement must be accounted for and reported by the estate.
A trust may qualify as a simple trust if:
A complex trust is any trust that doesn't qualify as a simple trust as explained above.
A qualified disability trust is any non-grantor trust:
A trust will not fail to meet item 2 above just because the trust's corpus may revert to a person who isn't disabled after the trust ceases to have any disabled beneficiaries.
The S portion of an ESBT is the portion of the trust that consists of S corporation stock and that isn't treated as owned by the grantor or another person. See Electing Small Business Trusts (ESBTs) , earlier, for more information about an ESBT.
A grantor type trust is a legal trust under applicable state law that isn't recognized as a separate taxable entity for income tax purposes because the grantor or other substantial owners have not relinquished complete dominion and control over the trust.
Generally, for transfers made in trust after March 1, 1986, the grantor is treated as the owner of any portion of a trust in which they have a reversionary interest in either the income or corpus therefrom, if, as of the inception of that portion of the trust, the value of the reversionary interest is more than 5% of the value of that portion. Also, the grantor is treated as holding any power or interest that was held by either the grantor's spouse at the time that the power or interest was created or who became the grantor's spouse after the creation of that power or interest. See Grantor Type Trusts , earlier, for more information.
Pre-need funeral trusts.
The purchasers of pre-need funeral services are the grantors and the owners of pre-need funeral trusts established under state laws. See Rev. Rul. 87-127, 1987-2 C.B. 156. However, the trustees of pre-need funeral trusts can elect to file the return and pay the tax for qualified funeral trusts. For more information, see Form 1041-QFT.
Nonqualified deferred compensation plans.
Taxpayers may adopt and maintain grantor trusts in connection with nonqualified deferred compensation plans (sometimes referred to as “rabbi trusts”). Rev. Proc. 92-64, 1992-2 C.B. 422, provides a “model grantor trust” for use in rabbi trust arrangements. The procedure also provides guidance for requesting rulings on the plans that use these trusts.
QSSTs.
The beneficiary of a QSST is treated as the substantial owner of that portion of the trust which consists of stock in an S corporation for which an election under section 1361(d)(2) has been made. See QSSTs , earlier.
A chapter 7 or 11 bankruptcy estate is a separate and distinct taxable entity from the individual debtor for federal income tax purposes. See Bankruptcy Estates , earlier.
For more information, see section 1398 and Pub. 908.
A pooled income fund is a split-interest trust with a remainder interest for a public charity and a life income interest retained by the donor or for another person. The property is held in a pool with other pooled income fund property and doesn't include any tax-exempt securities. The income for a retained life interest is figured using the yearly rate of return earned by the trust. See section 642(c) and the related regulations for more information.
Every trust or decedent's estate claiming an income distribution deduction on page 1, line 18, must enter the number of Schedules K-1 (Form 1041) that are attached to Form 1041.
Every estate or trust that is required to file Form 1041 must have an EIN. An EIN may be applied for in the following ways.
If the estate or trust hasn't received its EIN by the time the return is due, enter “Applied for” and the date you applied in the space for the EIN. For more details, see Pub. 583, Starting a Business and Keeping Records.
Enter the date the trust was created, or, if a decedent's estate, the date of the decedent's death.
Check this box if the trust is a nonexempt charitable trust within the meaning of section 4947(a)(1).
A nonexempt charitable trust is a trust:
Nonexempt charitable trust treated as a private foundation.
If a nonexempt charitable trust is treated as though it were a private foundation under section 509, then the fiduciary must file Form 990-PF, Return of Private Foundation, in addition to Form 1041.
If a nonexempt charitable trust is treated as though it were a private foundation, and it has no taxable income under subtitle A, it may check the box on Form 990-PF, Part VI-A, line 15, and enter the tax-exempt interest received or accrued during the year on that line, instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year.
If a nonexempt charitable trust is treated as a private foundation, then it is subject to the same excise taxes under chapters 41 and 42 that a private foundation is subject to. If the nonexempt charitable trust is liable for any of these taxes (except the section 4940 tax), then it reports these taxes on Form 4720. Taxes paid by the trust on Form 4720 or on Form 990-PF (the section 4940 tax) can't be taken as a deduction on Form 1041.
Check this box if the nonexempt charitable trust (section 4947(a)(1)) isn't treated as a private foundation under section 509. For more information, see Regulations section 53.4947-1.
Other returns that must be filed.
If a nonexempt charitable trust isn't treated as though it were a private foundation, the fiduciary must file Form 990, Return of Organization Exempt From Income Tax; or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, in addition to Form 1041, if the trust meets the filing requirements for either of those forms.
If a nonexempt charitable trust isn't treated as though it were a private foundation, and it has no taxable income under subtitle A, it may answer “Yes” on Form 990, Part V, line 12a, and enter the tax-exempt interest received or accrued during the year on Form 990, Part V, line 12b, instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year (or if Form 990-EZ is filed instead of Form 990, you may check the box on Form 990-EZ, line 43, and enter the tax-exempt interest received or accrued during the year on that line).
Check this box if the trust is a split-interest trust described in section 4947(a)(2).
A split-interest trust is a trust that:
Other returns that must be filed.
The fiduciary of a split-interest trust must file Form 5227. However, see the Instructions for Form 5227 for the exception that applies to split-interest trusts other than section 664 CRTs.
If you are filing an amended Form 1041:
Note. If you are amending the return for an NOL carryback, also check the “Net operating loss carryback” box in item F.
If the total tax on line 24 is larger on the amended return than on the original return, you should generally pay the difference with the amended return. However, you should adjust this amount if there is any increase or decrease in the total payments shown on line 26.
Attach a sheet that explains the reason for the amendments and identifies the lines and amounts being changed on the amended return.
Amended Schedule H (Form 1040).
If you discover an error on a Schedule H (Form 1040), Household Employment Taxes, that you previously filed with Form 1041, file an “Amended” Form 1041 and attach a corrected Schedule H.
In the top margin of your corrected Schedule H, enter “CORRECTED” and the date you discovered the error. Also, on an attachment, explain the reason for your correction. If you owe tax, pay the tax in full with your amended Form 1041. If you overpaid tax on a previously filed Schedule H, depending on whether you choose the adjustment or claim for refund process to correct the error, you must either repay or reimburse the employee's share of social security and Medicare taxes or get the employee's consent to the filing of a refund claim for their share. See Pub. 926, Household Employer's Tax Guide, for more information.
Amended Schedule K-1 (Form 1041).
If the amended return results in a change to income, or a change in distribution of any income or other information provided to a beneficiary, an amended Schedule K-1 (Form 1041) must also be filed with the amended Form 1041 and given to each beneficiary. Check the “Amended K-1” box at the top of the amended Schedule K-1.
Check this box if this is a final return because the estate or trust has terminated. Also, check the “Final K-1” box at the top of Schedule K-1.
If, on the final return, there are excess deductions, an unused capital loss carryover, or an NOL carryover, see the instructions for box 11 of Schedule K-1, later.
If the name of the trust has changed from the name shown on the prior year's return (or Form SS-4 if this is the first return being filed), be sure to check this box.
If a different fiduciary enters their name on the line for Name and title of fiduciary than was shown on the prior year's return (or Form SS-4 if this is the first return being filed) and you didn't file a Form 8822-B, be sure to check this box. If there is a change in the fiduciary whose address is used as the mailing address for the estate or trust after the return is filed, use Form 8822-B to notify the IRS.
If the fiduciary changed their name from the name they entered on the prior year's return (or Form SS-4 if this is the first return being filed), be sure to check this box.
If the same fiduciary who filed the prior year's return (or Form SS-4 if this is the first return being filed) files the current year's return and changed the address on the return (including a change to an "in care of" name and address), and didn't report the change on Form 8822-B, check this box.
If the address shown on Form 1041 changes after you file the form (including a change to an "in care of" name and address), file Form 8822-B to notify the IRS of the change.
If a section 645 election was made by filing Form 8855, check the box in item G. See Special Rule for Certain Revocable Trusts under Who Must File , earlier, and Form 8855 for more information about this election.
The estate's or trust's QBI includes items of income, gain, deduction, and loss that are effectively connected with the conduct of a trade or business within the United States and included or allowed in determining taxable income for the year. This includes the estate's or trust's share of items of income, gain, deduction, and loss from trades or business conducted by partnerships (other than publicly traded partnerships (PTPs)), S corporations, and other estates or trusts. For more information, see section 199A, the Instructions for Form 8995, and the Instructions for Form 8995-A.
If you are reporting income from a qualified blind trust (under the Ethics in Government Act of 1978), don't identify the payer of any income to the trust but complete the rest of the return as provided in the instructions. Also enter “Blind Trust” at the top of page 1.
The extraterritorial income exclusion isn't allowed for transactions after 2006. However, income from certain long-term sales and leases may still qualify for the exclusion. For details and to figure the amount of the exclusion, see Form 8873, Extraterritorial Income Exclusion, and its separate instructions. The estate or trust must report the extraterritorial income exclusion on line 15a of Form 1041, page 1.
Although the extraterritorial income exclusion is entered on line 15a, it is an exclusion from income and should be treated as tax-exempt income when completing other parts of the return.
Report the estate's or trust's share of all taxable interest income that was received during the tax year. Examples of taxable interest include interest from:
For taxable bonds acquired after 1987, amortizable bond premium is treated as an offset to the interest income instead of as a separate interest deduction. See Pub. 550.
For the year of the decedent's death, Forms 1099-INT issued in the decedent's name may include interest income earned after the date of death that should be reported on the income tax return of the decedent's estate. When preparing the decedent's final income tax return, report on Schedule B (Form 1040), line 1, the total interest shown on Form 1099-INT. Under the last entry on line 1, subtotal all the interest reported on line 1. Below the subtotal, enter “Form 1041” and the name and address shown on Form 1041 for the decedent's estate. Also, show the part of the interest reported on Form 1041 and subtract it from the subtotal.
Report the estate's or trust's share of all ordinary dividends received during the tax year.
For the year of the decedent's death, Forms 1099-DIV issued in the decedent's name may include dividends earned after the date of death that should be reported on the income tax return of the decedent's estate. When preparing the decedent's final income tax return, report on Schedule B (Form 1040), line 5, the ordinary dividends shown on Form 1099-DIV. Under the last entry on line 5, subtotal all the dividends reported on line 5. Below the subtotal, enter “Form 1041” and the name and address shown on Form 1041 for the decedent's estate. Also, show the part of the ordinary dividends reported on Form 1041 and subtract it from the subtotal.
Report capital gain distributions on Schedule D (Form 1041), line 13.
Enter the beneficiary's allocable share of qualified dividends on line 2b(1) and enter the estate's or trust's allocable share on line 2b(2).
If the estate or trust received qualified dividends that were derived from IRD, you must reduce the amount on line 2b(2) by the portion of the estate tax deduction claimed on Form 1041, page 1, line 19, that is attributable to those qualified dividends. Don't reduce the amounts on line 2b by any other allocable expenses.
The beneficiary's share (as figured above) may differ from the amount entered on line 2b of Schedule K-1 (Form 1041).
Qualified dividends.
Qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, these dividends are reported to the estate or trust in box 1b of Form(s) 1099-DIV. See Pub. 550 for the definition of qualified dividends if the estate or trust received dividends not reported on Form 1099-DIV.
Some dividends may be reported to the estate or trust as in box 1b of Form 1099-DIV but aren't qualified dividends. These include the following.
If you have an entry on line 2b(2), be sure you use Schedule D (Form 1041), the Schedule D Tax Worksheet, or the Qualified Dividends Tax Worksheet, whichever applies, to figure the estate's or trust's tax. Figuring the estate's or trust's tax liability in this manner will usually result in a lower tax.
If the estate operated a business, report the income and expenses on Schedule C (Form 1040), Profit or Loss From Business. Enter the net profit or (loss) from Schedule C on line 3.
Enter the gain from Schedule D (Form 1041), Part III, line 19, column (3), or the loss from Part IV, line 20.
If you deferred a capital gain into a QOF, you must file your return with Schedule D, Form 8949, and Form 8997 attached. You will need to file Form 8997 annually until you dispose of the investment. See the Form 8997 instructions.
Don't substitute Schedule D (Form 1040) for Schedule D (Form 1041).
Use Schedule E (Form 1040), Supplemental Income and Loss, to report the estate's or trust's share of income or (losses) from rents, royalties, partnerships, S corporations, other estates and trusts, and REMICs. Also use Schedule E (Form 1040) to report farm rental income and expenses based on crops or livestock produced by a tenant. Enter the net profit or (loss) from Schedule E on line 5. See the Instructions for Schedule E (Form 1040) for reporting requirements.
If the estate or trust received a Schedule K-1 from a partnership, S corporation, or other flow-through entity, use the corresponding lines on Form 1041 to report the interest, dividends, capital gains, etc., from the flow-through entity.
If the estate or trust operated a farm, use Schedule F (Form 1040), Profit or Loss From Farming, to report farm income and expenses. Enter the net profit or (loss) from Schedule F on line 6.
If an estate or trust has farm rental income and expenses based on crops or livestock produced by a tenant, report the income and expenses on Schedule E (Form 1040). Don't use Form 4835, Farm Rental Income and Expenses, or Schedule F (Form 1040) to report such income and expenses and don't include the net profit or (loss) from such income and expenses on line 6.
Enter from line 17 of Form 4797, Sales of Business Property, the ordinary gain or loss from the sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft).
Enter other items of income not included on lines 1, 2a, and 3 through 7. List the type and amount on an attached schedule if the estate or trust has more than one item.
Items to be reported on line 8 include the following.
Beginning in tax year 2021, there is no current year section 965(a) income inclusion reported on line 8. However, see the instructions for Schedule G, Part I, line 8, later, for information about a triggering event for a section 965(i) net tax liability.
A trust or decedent's estate is allowed a deduction for depreciation, depletion, and amortization only to the extent the deductions aren't apportioned to the beneficiaries. An estate or trust isn't allowed to make an election under section 179 to expense depreciable business assets.
The estate's or trust's share of depreciation, depletion, and amortization is generally reported on the appropriate lines of Schedule C, E, or F (Form 1040), the net income or loss from which is shown on line 3, 5, or 6 of Form 1041. If the deduction isn't related to a specific business or activity, then report it on line 15a.
Depreciation.
For a decedent's estate, the depreciation deduction is apportioned between the estate and the heirs, legatees, and devisees on the basis of the estate's income allocable to each.
For a trust, the depreciation deduction is apportioned between the income beneficiaries and the trust on the basis of the trust income allocable to each, unless the governing instrument (or local law) requires or permits the trustee to maintain a depreciation reserve. If the trustee is required to maintain a reserve, the deduction is first allocated to the trust, up to the amount of the reserve. Any excess is allocated among the income beneficiaries and the trust in the same manner as the trust's accounting income. See Regulations section 1.167(h)-1(b).
Depletion.
For mineral or timber property held by a decedent's estate, the depletion deduction is apportioned between the estate and the heirs, legatees, and devisees on the basis of the estate's income from such property allocable to each.
For mineral or timber property held in trust, the depletion deduction is apportioned between the income beneficiaries and the trust based on the trust income from such property allocable to each, unless the governing instrument (or local law) requires or permits the trustee to maintain a reserve for depletion. If the trustee is required to maintain a reserve, the deduction is first allocated to the trust, up to the amount of the reserve. Any excess is allocated among the beneficiaries and the trust in the same manner as the trust's accounting income. See Regulations section 1.611-1(c)(4).
Amortization.
The deduction for amortization is apportioned between an estate or trust and its beneficiaries under the same principles used to apportion the deductions for depreciation and depletion.
The deduction for the amortization of reforestation expenditures under section 194 is allowed only to an estate.
Allocable share from a pass-through entity.
Depreciation, depletion, and amortization received from a pass-through entity on a Schedule K-1 are apportioned and reported in the same manner as discussed above. A section 179 expense received from a pass-through entity on a Schedule K-1 isn't deductible by the estate or trust.
Generally, no deduction that would otherwise be allowable is allowed for any expense (whether for business or for the production of income) that is allocable to tax-exempt income. Examples of tax-exempt income include:
Exception.
State income taxes and business expenses that are allocable to tax-exempt interest are deductible.
Expenses that are directly allocable to tax-exempt income are allocated only to tax-exempt income. A reasonable proportion of expenses indirectly allocable to both tax-exempt income and other income must be allocated to each class of income.
Administration expenses and casualty and theft losses deductible on Form 706 may be deducted, to the extent otherwise deductible for income tax purposes, on Form 1041 if the fiduciary files a statement waiving the right to deduct the expenses and losses on Form 706. The statement must be filed before the expiration of the statutory period of limitations for the tax year the deduction is claimed. See Pub. 559 for more information.
Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year that (a) all events have occurred that determine the liability, and (b) the amount of the liability can be figured with reasonable accuracy. However, all the events that establish liability are treated as occurring only when economic performance takes place. There are exceptions for recurring items. See section 461(h).
Generally, the amount the estate or trust has “at-risk” limits the loss it can deduct for any tax year. Use Form 6198, At-Risk Limitations, to figure the deductible loss for the year and file it with Form 1041. For more information, see Pub. 925, Passive Activity and At-Risk Rules.
In general.
Section 469 and the regulations thereunder generally limit losses from passive activities to the amount of income derived from all passive activities. Similarly, credits from passive activities are generally limited to the tax attributable to such activities. These limitations are first applied at the estate or trust level.
Generally, an activity is a passive activity if it involves the conduct of any trade or business, and the taxpayer does not materially participate in the activity. Passive activities don't include working interests in oil and gas properties. See section 469(c)(3).
Material participation standards for estates and trusts haven't been established by regulations.
For a grantor trust, material participation is determined at the grantor level.
If the estate or trust distributes an interest in a passive activity, the basis of the property immediately before the distribution is increased by the passive activity losses allocable to the interest, and such losses can't be deducted. See section 469(j)(12).
Losses from passive activities are first subject to the at-risk rules. When the losses are deductible under the at-risk rules, the passive activity rules then apply.
Rental activities.
Generally, rental activities are passive activities, whether or not the taxpayer materially participates. However, certain taxpayers who materially participate in real property trades or businesses aren't subject to the passive activity limitations on losses from rental real estate activities in which they materially participate. For more details, see section 469(c)(7).
For tax years of an estate ending less than 2 years after the decedent's date of death, up to $25,000 of deductions and deduction equivalents of credits from rental real estate activities in which the decedent actively participated are allowed. Any excess losses or credits are suspended for the year and carried forward.
Portfolio income.
Portfolio income isn't treated as income from a passive activity, and passive losses and credits generally may not be applied to offset it. Portfolio income generally includes interest, dividends, royalties, and income from annuities. Portfolio income of an estate or trust must be accounted for separately.
Forms to file.
See Form 8582, Passive Activity Loss Limitations, to figure the amount of losses allowed from passive activities. See Form 8582-CR, Passive Activity Credit Limitations, to figure the amount of credit allowed for the current year.
Business interest expense could be limited. For more information about limitations on deductions for business interest, see section 163(j) and Line 10—Interest , later.
Under section 267, a trust that uses the accrual method of accounting may only deduct business expenses and interest owed to a related party in the year the payment is included in the income of the related party. For this purpose, a related party includes:
Enter the amount of interest (subject to limitations) paid or incurred by the estate or trust on amounts borrowed by the estate or trust, or on debt acquired by the estate or trust (for example, outstanding obligations from the decedent) that isn't claimed elsewhere on the return.
If the proceeds of a loan were used for more than one purpose (for example, to purchase a portfolio investment and to acquire an interest in a passive activity), the fiduciary must make an interest allocation according to the rules in Temporary Regulations section 1.163-8T.
Don't include interest paid on indebtedness incurred or continued to purchase or carry obligations on which the interest is wholly exempt from income tax.
Personal interest isn't deductible. Examples of personal interest include interest paid on:
Interest that is paid or incurred on indebtedness allocable to a trade or business (including a rental activity) should be deducted on the appropriate line of Schedule C, E, or F (Form 1040), the net income or loss from which is shown on line 3, 5, or 6 of Form 1041.
Types of interest to include on line 10 are:
Limitation on deduction of business interest.
Business interest expense is limited to the sum of business interest income, 30% of the adjusted taxable income, and floor plan financing interest. Business interest expense includes any interest paid or accrued on indebtedness properly allocable to a trade or business. A taxpayer, other than a tax shelter, that meets the gross receipts test is not required to limit business interest expense under section 163(j). A taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $29 million or less for the 3 prior tax years. Gross receipts include the aggregate gross receipts from all persons treated as a single employer such as a controlled group of corporations, commonly controlled partnerships or proprietorships, and affiliated service groups. If the taxpayer fails to meet the gross receipts test, Form 8990 is generally required.
Investment interest.
Generally, investment interest is interest (including amortizable bond premium on taxable bonds acquired after October 22, 1986, but before January 1, 1988) that is paid or incurred on indebtedness that is properly allocable to property held for investment. Investment interest doesn't include any qualified residence interest, or interest that is taken into account under section 469 in figuring income or loss from a passive activity.
Generally, net investment income (NII) is the excess of investment income over investment expenses. Investment expenses (other than interest) are deductible only to the extent they are allowable under section 67(e).
The amount of the investment interest deduction may be limited. Use Form 4952, Investment Interest Expense Deduction, to figure the allowable investment interest deduction.
If you must complete Form 4952, check the box on line 10 of Form 1041 and attach Form 4952. Then, add the deductible investment interest to the other types of deductible interest and enter the total on line 10.
Qualified residence interest.
Interest paid or incurred by an estate or trust on indebtedness secured by a qualified residence of a beneficiary of an estate or trust is treated as qualified residence interest if the residence would be a qualified residence (that is, the principal residence or the secondary residence selected by the beneficiary) if owned by the beneficiary. The beneficiary must have a present interest in the estate or trust or an interest in the residuary of the estate or trust. See Pub. 936, Home Mortgage Interest Deduction, for an explanation of the general rules for deducting home mortgage interest.
See section 163(h)(3) for a definition of qualified residence interest and for limitations on indebtedness.
The deduction for state and local taxes is limited to $10,000. The limitation applies to the total of your state and local income taxes (or general sales taxes, if elected instead of income taxes), real estate taxes, and personal property taxes. The limitation does not apply to foreign income taxes, and state and local taxes paid or accrued in carrying on a trade or business or for the production of income.
Enter any deductible taxes paid or incurred during the tax year that aren't deductible elsewhere on Form 1041. Deductible taxes include the following.
Do not deduct the estate's or trust's deduction for social security and Medicare taxes by the amount claimed on its employment tax returns for the nonrefundable and refundable portions of the FFCRA and the ARP credits for qualified sick and family leave wages. Instead, report this amount as income on line 8.
Safe harbor for certain charitable contributions made in exchange for a state or local tax credit.
If you made a charitable contribution in exchange for a state or local tax credit and your charitable contribution deduction must be reduced as a result of receiving or expecting to receive the tax credit, you may qualify for a safe harbor that allows you to treat some or all of the disallowed charitable contribution as a payment of state and local taxes. The safe harbor applies if you meet the following conditions.
If you meet these conditions, and to the extent you apply the state or local tax credit to this or a prior year's state or local tax liability, you may include this amount on line 11. To the extent you apply a portion of the credit to offset your state or local tax liability in a subsequent year (as permitted by law), you may treat this amount as state or local tax paid in the year the credit is applied. For more information about this safe harbor and examples, see Notice 2019-12.
Enter the deductible fees paid or incurred to the fiduciary for administering the estate or trust during the tax year.
Fiduciary expenses include probate court fees and costs, fiduciary bond premiums, legal publication costs of notices to creditors or heirs, the cost of certified copies of the decedent's death certificate, and costs related to fiduciary accounts.
Fiduciary fees deducted on Form 706 can't be deducted on Form 1041.
Note.
Fiduciary fees are allowable under section 67(e) if they are costs that are paid or incurred in connection with the administration of an estate or a non-grantor trust that would not have been incurred if the property were not held in such estate or trust. See Final Regulations - TD9918 and Regulations section 1.67-4 for more information.
Expenses for preparation of fiduciary income tax returns, the decedent's final individual income tax returns, and all estate and GST tax returns are fully deductible. However, expenses for preparing all other tax returns, including gift tax returns, are considered costs commonly and customarily incurred by individuals and are not deductible. For more information, see Final Regulations - TD9918 and Regulations section 1.67-4.
Attach your own statement, listing by type and amount all allowable deductions that aren't deductible elsewhere on Form 1041.
Allowable deductions include all deductions listed in section 67(b) (including estate taxes attributable to IRD under section 691(c)), and other costs allowable under section 67(e) paid or incurred in connection with the administration of the estate or trust that would not have been incurred if the property were not held in the estate or trust.
Don't include any losses on worthless bonds and similar obligations and nonbusiness bad debts. Report these losses, as applicable, on Form 8949.
Don't deduct medical or funeral expenses on Form 1041. Medical expenses of the decedent paid by the estate may be deductible on the decedent's income tax return for the year incurred. See section 213(c). Funeral expenses are deductible only on Form 706.
Other costs paid or incurred by estates and non-grantor trusts.
Under section 67(e), deductions are allowable for costs which are paid or incurred by an estate or non-grantor trust in connection with the administration of the estate or trust and would not have been incurred if the property were not held in such estate or trust.
In determining whether a cost is deductible by an estate or non-grantor trust, it must be determined whether the cost would be “commonly or customarily” incurred by a hypothetical individual owning the same property. If the cost would be deductible by a hypothetical individual, it is not deductible by the estate or non-grantor trust.
It is the type of product or service rendered to the estate or non-grantor trust in exchange for the cost, rather than the description of the cost of that product or service, that is determinative.
Costs that are incurred commonly or customarily by individuals include costs incurred in defense of a claim against the estate, the decedent, or the non-grantor trust that are unrelated to the existence, validity, or administration of the estate or trust. These amounts are not allowable deductions.
Ownership costs.
Ownership costs are costs that are chargeable to or incurred by an owner of property simply by reason of being the owner of the property. These costs are commonly or customarily incurred by a hypothetical individual owner of such property and are not deductible by an estate or non-grantor trust. Under section 67(b), they include, but are not limited to, condominium fees, insurance premiums, maintenance and lawn services, automobile registration and insurance costs, and partnership costs deemed to be passed through to and reportable by a partner. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code.
Appraisal fees.
Appraisal fees incurred to determine the FMV of assets as of the decedent's date of death (or the alternate valuation date), to determine value for purposes of making distributions, or as otherwise required to properly prepare the estate's or trust's tax returns, or a GST tax return, are not incurred commonly or customarily by an individual and are deductible. The cost of appraisals for other purposes (for example, insurance) is commonly or customarily incurred by individuals and is not an allowable deduction.
Investment advisory fees.
Fees for investment advice, including any related services that would be provided to any individual investor as part of an investment advisory fee, are incurred commonly or customarily by a hypothetical individual investor and are not deductible. However, certain incremental costs of investment advice beyond the amount that would normally be charged to an individual investor are deductible.
An incremental cost is a special, additional charge that is added solely because the investment advice is rendered to a trust or estate rather than to an individual, including balancing beyond the usual varying interests of current beneficiaries and remaindermen. The deductible portion of the investment advisory fees is limited to the amount of those fees, if any, that exceeds the fees normally charged to an individual investor. See Regulations section 1.67-4(b)(4).
Bundled fees.
If an estate or non-grantor trust pays a single fee, commission, or other expense, such as a fiduciary's commission, attorney's fee, or accountant's fee for both costs that are incurred commonly or customarily by individuals and costs (other than a de minimis amount) that are not incurred commonly or customarily by individuals, then (except to the extent provided otherwise by guidance published in the Internal Revenue Bulletin) the single fee, commission, or other expense (bundled fee) must be allocated between the costs that are incurred commonly or customarily by individuals, such costs not being deductible, and costs that are not incurred commonly or customarily by individuals, such costs being deductible.
There is an exception to the allocation rule if a bundled fee is not computed on an hourly basis. In this situation, only the portion of that fee that is attributable to investment advice is not deductible. The remaining portion is deductible.
Out-of-pocket expenses billed to the estate or non-grantor trust are treated as separate from the bundled fee and are not subject to allocation.
Estates and non-grantor trusts cannot deduct payments made from the bundled fee to third parties if such payments would not have been deductible if they had been paid directly by the estate or non-grantor trust.
Any reasonable method may be used to allocate a bundled fee, including without limitation the allocation of a portion of a fiduciary commission that is a bundled fee to investment advice. For more information, see Regulations section 1.67-4(c)(4).
Note. The reasonable method standard does not apply to determine the portion of the bundled fee attributable to payments made to third parties commonly or customarily incurred by an individual or to any other separately assessed expense commonly or customarily incurred by an individual, because those payments and expenses are readily identifiable without any discretion on the part of the fiduciary or return preparer.
For more information, see Regulations section 1.67-4.
Bond premium(s).
For taxable bonds acquired before October 23, 1986, if the fiduciary elected to amortize the premium, report the amortization on this line. If you made the election to amortize the premium, the basis in the taxable bond must be reduced by the amount of amortization.
For tax-exempt bonds, you can't deduct the premium that is amortized. Although the premium can't be deducted, you must amortize the tax-exempt bond by the amount of premium amortized.
For more information, see section 171 and Pub. 550.
If you claim a bond premium deduction for the estate or trust, figure the deduction on a separate sheet and attach it to Form 1041.
Casualty and theft losses.
Use Form 4684, Casualties and Thefts, to figure any deductible casualty and theft losses.
Estate's or trust's share of amortization, depreciation, and depletion not claimed elsewhere.
If you can't deduct the estate's or trust's apportioned share of amortization, depreciation, and depletion as rent or royalty expenses on Schedule E (Form 1040), or as business or farm expenses on Schedule C or F (Form 1040), itemize the estate's or trust's apportioned share of the deductions on an attached sheet and include them on line 15a.
Don't report the beneficiary's apportioned share of depreciation, depletion, and amortization on line 15a. Report the beneficiary's apportioned share of deductions in box 9 of Schedule K-1 (Form 1041).
Itemize each beneficiary's apportioned share of the deductions and report them in the appropriate box of Schedule K-1 (Form 1041).
Section 179D.
Enter any applicable deduction under section 179D for costs of energy efficient commercial business property placed in service during the tax year. Complete and attach Form 7205, Energy Efficient Commercial Buildings Deduction.
An estate or trust is allowed an NOLD under section 172.
If you claim an NOLD for the estate or trust, figure the deduction on a separate sheet and attach it to the return.
If the estate or trust was required to distribute income currently or if it paid, credited, or was required to distribute any other amounts to beneficiaries during the tax year, complete Schedule B to determine the estate's or trust's income distribution deduction. However, if you are filing for a pooled income fund, don't complete Schedule B. Instead, attach a statement to support the computation of the income distribution deduction. For more information, see Pooled Income Funds , earlier.
If the estate or trust claims an income distribution deduction, complete and attach:
Cemetery perpetual care fund.
On line 18, deduct the amount, not more than $5 per gravesite, paid for maintenance of cemetery property. To the right of the entry space for line 18, enter the number of gravesites. Also enter “Section 642(i) trust” in parentheses after the trust's name at the top of Form 1041. You don't have to complete Schedule B of Form 1041, and Schedule K-1 (Form 1041).
Don't enter less than zero on line 18.
If the estate or trust includes IRD in its gross income, and such amount was included in the decedent's gross estate for estate tax purposes, the estate or trust is allowed to deduct in the same tax year that the income is included that portion of the estate tax imposed on the decedent's estate that is attributable to the inclusion of the IRD in the decedent's estate. For an example of the computation, see Regulations section 1.691(c)-1 and Pub. 559.
If any amount properly paid, credited, or required to be distributed by an estate or trust to a beneficiary consists of IRD received by the estate or trust, don't include such amounts in determining the estate tax deduction for the estate or trust. Figure the deduction on a separate sheet. Attach the sheet to your return.
If you claim a deduction for estate tax attributable to qualified dividends or capital gains, you may have to adjust the amount on Form 1041, page 1, line 2b(2); or Schedule D (Form 1041), line 22.
Also, a deduction is allowed for the GST tax imposed as a result of a taxable termination or a direct skip occurring as a result of the death of the transferor. See section 691(c)(3). Enter the estate's or trust's share of these deductions on line 19.
To figure your QBI deduction, use Form 8995 or Form 8995-A, as applicable.
Use Form 8995 if:
If you don’t meet these requirements, use Form 8995-A. Attach whichever form you use (Form 8995 or 8995-A) to your return. Also attach Schedule C, E, or F (Form 1040), whichever form you use to report information about your QBI. See the instructions for Forms 8995 and 8995-A for more information for figuring and reporting your QBI deduction.
Report the beneficiary’s apportioned share of items of QBI (loss) subject to beneficiary specific determinations, W-2 wages, unadjusted basis immediately after acquisition (UBIA) of qualified property, qualified REIT dividends, and qualified PTP income on a statement attached to Schedule K-1 (Form 1041). See the instructions for box 14, code I, of Schedule K-1 (Form 1041), later.
Decedents' estates.
A decedent's estate is allowed a $600 exemption.
Trusts required to distribute all income currently.
A trust whose governing instrument requires that all income be distributed currently is allowed a $300 exemption, even if it distributed amounts other than income during the tax year.
Qualified disability trusts.
A qualified disability trust is allowed a $4,700 exemption. This amount is not subject to phaseout.
A qualified disability trust is any trust:
A trust will not fail to meet item 2 above just because the trust's corpus may revert to a person who isn't disabled after the trust ceases to have any disabled beneficiaries.
All other trusts.
A trust not described above is allowed a $100 exemption.
Minimum taxable income.
Line 23 can't be less than the larger of:
Net operating loss (NOL).
If line 23 (figured without regard to the minimum taxable income rule stated above) is a loss, the estate or trust may have an NOL. Don't include the deductions claimed on lines 13, 18, and 21 when figuring the amount of the NOL.
Generally, an NOL can only be carried forward to subsequent years and cannot be carried back. The 2-year carryback period only applies to the portion of an NOL attributable to a farming loss. For more information, see Pub. 536.
Complete Schedule A of Form 1045, Application for Tentative Refund, to figure the amount of the NOL that is available for carryback or carryover. Use Form 1045 or file an amended return to apply for a refund based on an NOL carryback. For more information, see the Instructions for Form 1045.
On the termination of the estate or trust, any unused NOL carryover that would be allowable to the estate or trust in a later tax year but for the termination is allowed to the beneficiaries succeeding to the property of the estate or trust. See the instructions for box 11, codes E and F, of Schedule K-1 (Form 1041), later.
Excess deductions on termination.
If the estate or trust has for its final year deductions (excluding the charitable deduction and personal exemption) in excess of its gross income, the excess deductions are allowed to the beneficiaries succeeding to the property of the estate or trust and retain their separate character as an amount allowed in arriving at AGI, a non-miscellaneous itemized deduction, or a miscellaneous itemized deduction. In general, an unused NOL carryover that is allowed to beneficiaries (as explained above) can't also be treated as an excess deduction. However, if the final year of the estate or trust is also the last year of the NOL carryover period, the NOL carryover not absorbed in that tax year by the estate or trust is included as an excess deduction. See the instructions for box 11, codes A and B, of Schedule K-1 (Form 1041), later.
If you made a payment with respect to a current net 965 tax liability, enter the amount of the payment from Form 965-A, Part II, column (k).
If line 28 is at least $1,000 and more than 10% of the tax shown on Form 1041, or the estate or trust underpaid its 2023 estimated tax liability for any payment period, it may owe a penalty. See Form 2210 to determine whether the estate or trust owes a penalty and to figure the amount of the penalty.
The penalty may be waived or reduced under certain conditions. See Pub. 505, Tax Withholding and Estimated Tax, and the Instructions for Form 2210 for details.
You must pay the tax in full when the return is filed. You may pay by EFTPS. For more information about EFTPS, see Electronic Deposits , earlier. Also, you may pay by check or money order or by credit or debit card.
To pay by check or money order.
If you pay by check or money order:
The IRS can't accept a single check (including a cashier's check) for amounts of $100,000,000 ($100 million) or more. If you're sending $100 million or more by check, you'll need to spread the payments over two or more checks with each check made out for an amount less than $100 million. The $100 million or more amount limit doesn't apply to other methods of payment (such as electronic payments), so please consider paying by means other than checks.
To pay by credit or debit card.
For information on paying your taxes electronically, including by credit or debit card, go to IRS.gov/E-pay.
Enter the amount from line 29 that you want applied to the estate's or trust's 2024 estimated tax.
Generally, any part of the gross income of an estate or trust (other than a simple trust) that, under the terms of the will or governing instrument, is paid (or treated as paid) during the tax year for a charitable purpose specified in section 170(c) is allowed as a deduction to the estate or trust. It isn't necessary that the charitable organization be created or organized in the United States.
A pooled income fund or a section 4947(a)(1) nonexempt charitable trust treated as a private foundation must attach a separate sheet to Form 1041 instead of using Schedule A of Form 1041 to figure the charitable deduction.
Additional return to be filed by trusts.
Trusts, other than split-interest trusts or nonexempt charitable trusts, that claim a charitable deduction also file Form 1041-A unless the trust is required to distribute currently to the beneficiaries all the income for the year determined under section 643(b) and related regulations.
Pooled income funds and charitable lead trusts also file Form 5227. See Form 5227 for information about any exceptions.
Election to treat contributions as paid in the prior tax year.
The fiduciary of an estate or trust may elect to treat as paid during the tax year any amount of gross income received during that tax year or any prior tax year that was paid in the next tax year for a charitable purpose.
For example, if a calendar year estate or trust makes a qualified charitable contribution on February 7, 2024, from income earned in 2023 or prior, then the fiduciary can elect to treat the contribution as paid in 2023.
To make the election, the fiduciary must file a statement with Form 1041 for the tax year in which the contribution is treated as paid. This statement must include:
The election must be filed by the due date (including extensions) for Form 1041 for the next tax year. If the original return was filed on time, you may make the election on an amended return filed no later than 6 months after the due date of the return (excluding extensions). Enter “Filed pursuant to section 301.9100-2” at the top of the amended return and file it at the same address you used for your original return.
For more information about the charitable deduction, see section 642(c) and the related regulations.