Way to File 1041 for Simple Trust

isonclubikin

For the first time, I'm going to have to file a Federal Form 1041 for a simple trust's taxes. My normal online tax place (FreeTaxUSA) doesn't support that. I see TurboTax Business for Desktop does. But, I thought I'd ask: does anyone know of other software (or online tax filing sites) that supports the filing of Form 1041 (and all its required schedules, forms and worksheets) for simple trusts?

Boatnmaniac

I assume by "simple trust" you are referring to an irrevocable estate trust for which all annual income must be distributed to beneficiaries each year. These are considered to be businesses for tax purposes which is why TT Business software is needed. H&R Block and TaxAct also offer equivalent support for 1041 tax returns with their business tax software.

You can find some additional resources by Googling "tax programs that support form 1041 tax returns".

Note: If the trust has less than a $600 AGI you likely do not need to file a tax return.

Jim_Harman

I use TurboTax Business. It seems expensive when the Trust distributes all its income and hardly ever owes any taxes, but for me it is easier than figuring out the forms myself and much less expensive than hiring an accountant. Depending on the state of the Trust and the beneficiary(s), the Trust may also need to file state taxes.

Note that Quicken is not very well suited for doing the Trust accounting, which may require keeping separate Principal and Income accounts. I have been able to do it by keeping all of the Trust's assets in one investing account with a linked checking account, but it is not pretty.

I found this book "Estate and Trust Administration for Dummies" to be very helpful in sorting out the responsibilities of being a Trustee.

https://a.co/d/5IWxFjq

You should consult an accountant and/or Trust attorney for more information.

isonclubikin

Yes. A Simple trust in that it has to distribute all its income.

In the IRS instructions for Form 1041, I found: "The fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic trust taxable under section 641 that has:

Any taxable income for the tax year;
Gross income of $600 or more (regardless of taxable income);
A beneficiary who is a nonresident alien; or
If you held a qualified investment in a QOF at any time during the year, you must file your return with Form 8997 attached. See the Form 8997 instructions."

Usually, even though the trust has quite a bit of income, it's all distributed to the beneficiary. So, I guess that's why I can't find filed tax returns for the trust recently.

[EDIT] Actually, I'm looking at the above, and I see it's $600 of Gross Income, not Adjusted Gross Income. Doesn't that mean that even if the income is distributed to the beneficiary, it's still income counting towards that $600 limit and the trust should have been filing taxes every year since it always had more than $600 in income?[/EDIT]

But, this year, one of the trust's mutual funds dumped a big long-term capital gain into it (well over the $600 limit). By the terms of the trust, capital gains are part of the principle and not distributed. So, I'll have to actually file the taxes. Of course, even without that LTCG, I'd still have to prepare the taxes just to get the K-1 for the beneficiary's personal taxes. I tried wading through the 1041 by hand and was climbing the walls by the end (or what I think was the end — having never done a 1041, I probably got it wrong (and don't get me started on understanding the AMT instructions for it)).

The trust account consists solely of one brokerage account with just a handful of securities in it (2 stocks, 2 mutual funds, and 2 semi-money-market funds). So, it's not too hard separating the principal and income in Quicken. I've gone through last year's numbers and produced what I think is a good Summary of Account for the year. So, I think I'll be ok.

My mother was using a CPA for the taxes and Summary of Account. But, they were charging her in excess of $2,000/yr for it (and since my mother just dumped a huge pile of paper on them to wade through to generate those, I guess that's understandable). But, I've got everything in Quicken now, so I figure a couple of hundred dollars for the filing software and quite a bit of tearing out of hair might be a reasonable trade-off.

Back in the day, I used to use Turbo Tax for my own taxes. But, for some reason they irritated me enough that I switched to FreeTaxUSA and that's been fine. I sure wish they handled 1041s. I was leaning towards TT Business for this, but then I read comments where people complained it wouldn't let them e-file state taxes. And that worries me.

jacobs

On possibility is to find a CPA to create the Form 1041 for you this year — and then plan to do it on your own in the future. For a return as simple as you describe, I'd expect to pay a CPA closer to $1,000, not $2,000. Perhaps contact a few local CPA firms for a price.

I was leaning towards TT Business for this, but then I read comments where people complained it wouldn't let them e-file state taxes.

I wouldn't let that stop you. I prefer e-filing, too, but so what if you need to print the return and mail it? if TT Busienss will get you the return you need, invest the extra couple dollars in return receipt postage and be done with it. 😂

Jim_Harman

If the CPA or another Trustee has been filing the returns for the Trust, the beneficiary may only see the K-1s.

For TurboTax Business, you do have to pay extra for state returns, there is no Federal/State bundle. TT Business is $144 on Amazon now and the State is an extra $50, which you pay to Intuit when you start filling out the state return. Rather than paying extra for e-filing, I have been printing and filing the trust returns the old fashioned way.

The user interface for TT Business has improved and is now more like the personal desktop products than in in the past, but it is still a different program and takes some getting used to.

Don't forget to include the software costs as administrative costs of the Trust; they may reduce the taxes the beneficiary pays by a little.

isonclubikin

OK. I don't like the reviews for TurboTax Business for Desktop on Amazon. Now, I'm looking at TaxAct Estates & Trusts:

https://www.taxact.com/individual-taxes/online/estates-and-trusts

Does anyone have any actual experience with that?