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What is a Form 1041?

A Form 1041 is a form published by the Internal Revenue Service that provides the executors of estates or administrators of trusts the ability to report estate or trust income. Note that reporting estate or trust income is different than reporting income for a deceased person. An executor usually has to file a regular income tax return for applicable income for a deceased person's income within a last living year.

The Form 1041, on the other hand, might need to be filed for any year during which a trust or estate receives income. Income can be received through investments. The form also lets trust administrators or another designee report losses to the Internal Revenue Service.

Other uses of the form include reporting wages and employment taxes for household workers who are paid by the trust or estate and reporting income disbursed by the estate or trust to beneficiaries. Entities that might need to file the Form 1041 include estates and trusts, though some exclusions do apply.

One thing to note about the Form 1041 is that, for the first year of filing, you might report a short tax year. The estate's tax year begins the day after the date of death and can run for up to 12 months. If you opt to end the tax year on the last day of December, then you are opting for a calendar tax year. If you opt to end the tax year one year after the person passed away, you are choosing to file with a fiscal tax year.

Understanding all the ins and outs of estate taxation can be difficult. Working with professionals to assist with trust administration duties, including tax filing, can help you ensure a trust is handled in a legal, financially sound way.

Source: IRS, "Instructions for Form 1041 and Schedules A, B, G, J, and K-1," accessed Feb. 02, 2016

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