Trusts have been around for hundreds of years. For people who start them, they provide an excellent way to protect and ultimately give money to other people. Some people start trusts for their children, making it available when the child turns 18, 21 or another defined age. Other people set up trusts for charitable purposes, to serve as a structured benefactor to various worthy causes. American trusts have the same responsibility that every other income-producing person or entity has, and that is to pay taxes. The IRS has a distinctive form for estates and trusts that executors must complete.
Things You'll Need
- IRS form f-1041
- Tax accountant (Optional)
- Tax payment
- Tax and financial documents
Compile all financial records before beginning the process. This includes bank statements, receipts and any other necessary documents for the filing of taxes. Make sure that you have a Tax ID number for the trust.
Interview an accountant. Any professional you hire should have some experience dealing with trusts. Get references if possible.
If you as an executor decide to do the taxes yourself, fill out the header information honestly and thoroughly. If you are unsure about anything, see a tax attorney or accountant to clear up any confusion.
Fill out the income section. Disclose all income. Complete the deductions section. Any fiduciary fees (fees for administering the trust) would be deducted here. Deduct any preparation fees here as well.
Finish the tax preparation by subtracting the deductions from the total income. This gives the taxable income. Look at Schedule G to figure out your tax. If you paid ahead of time, then deduct this amount. If your payments are more than your tax due, then you get a refund. If not, then you owe. Sign and date the form. Send the form back with payment to the IRS. If you are due a refund, just send the form by itself.
Tips & Warnings
- If at all possible, do not try to file taxes for a trust unless you have experience with taxes. A professional is best to use.
- Fill out all information correctly and do not leave off any income. The IRS will find out eventually.
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