Form 1041

Have you ever heard of Form 1040? I’m sure you have. It is the form you use each year to file your taxes…while alive. So let’s say you drop dead. You think filing your taxes is done and over with? You wish. Even in the next world, your return still needs to be filed. This is where Form 1041 comes in. Form 1041 is also called the U.S. Income Tax Return for Estates and Trusts.

Typically, the executor of the estate files on behalf of the person who died. This form reports the income and other tax items prior to an estate being settled and after the death of the individual. For example, let’s say Bob dies on January 30′ 2015. A 1040 will need to be filed for January 1-30, 2015. From January 31- December 31,2015, Form 1041 will now need to be utilized for the income received.

When are you required to file a Form 1041?

  • The estate incurred gross income of $600 for more for the tax year
  • The estate had one or more beneficiaries who are nonresident aliens

Income that you typically see being reported on the 1041 includes rental income, a salary that was paid out after the death of the decedent, and interest on financial investments as well as dividends.

Ok, we know what income is…but can you reduce taxable income? The answer is yes. Here is a brief list of what reductions are available:

  • Distributions to the beneficiaries
  • Various fees such as executor fees, attorney fees, accountant fees, tax preparer fees, and administrative filing fees.
  • Miscellaneous deductions as long as they exceed 2% of the estates AGI (adjusted gross income)

If you are an executor and the estate you are managing is required to file a Form 1041, consider contacting an attorney, a CPA, or an Enrolled Agent. They should certainly be able to help you maneuver throughout the form and ensure you are reporting everything correctly.