Schedule K-1 is an IRS tax form used to report a beneficiary’s share of income from an estate or trust, as well as credits and deductions. Income from trusts and estates is reported to beneficiaries on Schedule K-1. Examples of income received by a beneficiary and reported on Schedule K-1 include interest, dividends, and capital gains. Schedule K-1 is also used to report partnership income and income to shareholders of subchapter S corporations. However, this article only addresses the use of Schedule K-1 for reporting income from trusts and estates. For information on tax returns required for estates and trusts, see tax returns due.
If you are an heir to an estate or the beneficiary of a living trust or another type of trust, you may receive a Schedule K-1 showing the income you received from an estate or trust. If you are the executor of an estate or the trustee of a trust, you may be required to complete Schedule K-1 Form 1041. For more on trustee duties, see how to administer a trust.
Duties of Executors and Trustees Regarding Schedule K-1 Form 1041
One of the duties of an executor or trustee is filing Schedule K-1 Form 1041 with the IRS to report income distributed by the estate or trust to a beneficiary. A Schedule K-1 must be prepared for each beneficiary that receives income. Review our executor checklist and trustee checklist to learn more about the duties of executors and trustees.As an executor or trustee, you are responsible to provide each beneficiary that receives income from the estate or trust with a Schedule K-1 so the beneficiary can report income, as well as any credits or deductions, on the beneficiary’s own tax return. The trustee or other fiduciary must provide beneficiaries with adequate, sufficient information about items reported on a Schedule K-1. If you are unsure what level of detail you need to disclose to a beneficiary on a tax form, consult a CPA.Because the beneficiary needs the information on Schedule K-1 to complete the beneficiary's own tax return, it is important for you to provide this information to all beneficiaries on time. See trustee investment duties.When preparing trust tax forms and communications with beneficiaries regarding trust distributions and disbursements, trustees and other fiduciaries may need to refer to the applicable state's Uniform Principal and Income Act, Uniform Fiduciary Income and Principal Act or similar state statutes. Trustees and other fiduciaries may wish to review provisions of these state laws on determining and distributing net income, disbursements from principal and income, income taxes, and related
Trust Accounting issues.
If You Receive a Schedule K-1
If you receive a Schedule K-1, review it carefully to make sure all information is correct, including your personal information and the amount of income you received. Give a copy of the Schedule K-1 to your CPA or tax preparer promptly to ensure you comply with all applicable federal and state tax reporting requirements.
Schedule K-1 contains information required to prepare your own income tax return. Per the IRS, a beneficiary should not file Schedule K-1 with their tax return, unless backup holding was reported on Schedule K-1. A copy of the Schedule K-1 form is filed with the IRS by the executor of the estate or trustee of the trust.
If the trust had losses, consult your tax preparer about whether any deductions are available. Because tax legislation may change the deductions available from year to year, do not rely on guidance received for prior tax years when filing a tax return.If you believe there is an error on the Schedule K-1 you received, first contact the executor or trustee that provided the Schedule K-1 and ask for a corrected or amended Schedule K-1. According to IRS instructions for Schedule K-1, if a beneficiary is unable to get the matter corrected with the fiduciary that provided the Schedule K-1, the beneficiary is required to file IRS Form 8082. To avoid IRS fees and penalties, always consult a CPA or tax professional when you encounter any federal or state income tax issue.
If You Did Not Receive a Schedule K-1
You will not always receive a Schedule K-1 form when you receive something from an estate or trust. If you want to know whether you should have received a Schedule K-1 in a particular situation, contact the executor of the estate or the trustee of the trust. See inheritances.
Where to Get Schedule K-1 Form 1041
If you are an executor or trustee and want to prepare Form 1041 yourself, you can use some premium types of tax preparation software. However, due to the complex nature of trust accounting and recent changes in tax laws, such as the Tax Cuts and Jobs Act, the expertise of a professional tax preparer is generally required.To obtain the necessary tax forms online, Form 1041 U.S. Income Tax Return for Estates and Trusts and a complete set of instructions for filing Schedule K-1 are also available from the IRS website. If you are not an accountant or tax professional, consult a CPA or tax professional about how to complete Schedule K-1 Form 1041.
Undistributed Estate and Trust Income
Income of an estate or trust that is not distributed to beneficiaries in a particular tax year is considered income of the estate or trust and is reported on IRS Form 1041. This tax form is available on the IRS website.This page was updated on March 27, 2019.
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