Get 2001 Form 1041t. Allocation Of Estimated Tax Payments To Beneficiaries

Income required to be distributed currently is income that is required under the terms of the governing instrument and applicable local law to be distributed in the year it is received.

Income required to be distributed to the beneficiaries is taxable to them regardless if it is distributed during the year. The trust or estate receives a deduction for distributions of income made to the beneficiaries. The distribution deduction is limited to the distributable net income (DNI) of the trust or estate.

New Filing Requirements As is the case for individuals, a trust is currently only required to file an income tax return for taxation years in which the trust owes tax or disposes of property. As of the 2021 taxation year, most trusts will be required to file income tax returns for every taxation year.

Form 1041 allows for an “income distribution deduction” that includes the total income reported on all beneficiary K-1s. You include Schedule B with the Form 1041 to take the distribution deduction.

See Box 11, Code A Excess Deductions on Termination Section 67(e) Expenses and Box 11, Code B—Excess Deductions on Termination—Non-Miscellaneous Itemized Deductions, later, for more information.

The trustee pays the top tax rate (which is currently 45% for non-resident individuals) for a non-resident trustee beneficiary.

These deductions must be authorized by either the decedent's will or by the trust document and must be paid out of income of the estate or trust and not from the corpus of the trust or assets of the estate. If Charitable Gifts have been made by the entity, you must complete Schedule A, which is part of Form 1041.

However, you don't need to attach a Schedule B every year you earn interest or dividends. It is only required when the total exceeds certain thresholds. For most taxpayers, a Schedule B is only necessary when you receive more than $1,500 of taxable interest or dividends.