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kmd
Level 3

Unexpected 1099-INT after final 1041 was filed.

Hello, as trustee, I completed a fiscal year 1041 for my mother's trust, so it ended on 8/31/2021, and I did a first and final 1041 at that time.  Well, I had a big surprise in the form of a 1099-INT for 2022 today, from a bank where I *thought* all accounts were closed.  It seems my mother had an account that I did not know about, and even though I told this bank I needed to close and distribute all money to beneficiaries, they failed to see this separate account.  Note that it was in the trust, at least, so no probate worries.  It's around $100K, and it paid $375 in interest in 2022.  I quickly pulled the money today and have already distributed it between myself and my brother - the beneficiaries issue is fortunately not complicated as there is just the two of us.  But now what....how to handle this unexpected interest in terms of taxes?  Another 1041 even though I filed what I thought was the final for fiscal year ending 8/31/2021?

 

To complicate things further, my mother died in 2020 before receiving her 2019 tax refund, which was delayed due to Covid backlogs at the IRS.  Finally.....in 2022, I received her substantial 2019 tax refund and interest on top of it.  The interest amounted to about $280.  So, I also received a 1099-INT from the IRS for 2022 because of interest on a refund that was owed for 2019.

 

From the taxes perspective, now do I even handle this?  Do I have to generate K-1s for me and my brother and pay it through our taxes?  The total unexpected 1099-INT between the unknown bank account and the IRS refund will be about $650 or so total.  There is no other income - as I mentioned, I had closed everything out for the estate and thought I had distributed all funds as of 8/31/2021.

 

Thank you for your help.

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Unexpected 1099-INT after final 1041 was filed.

6 Replies

Unexpected 1099-INT after final 1041 was filed.


kmd
Level 3

Unexpected 1099-INT after final 1041 was filed.

Thank you, but will there be trouble due to having already filed what I thought was the "final" 1041 for the EIN?  Issuing a K-1 isn't a big deal  as it will just go to me and my brother, but having to file the 1041 at all is worrisome because I checked the box indicating "final" and now, it's not - albeit partially due to the additional account but also due to the IRS failure to get the refund for 2019 distributed before 2022.  And then, there's also the 541 for the State of California to worry about.....in all cases, I checked the box "final 1041", "final 541".  Just worried about the repercussions.  I am fine paying taxes on the income via K-1, just worried about potential penalties and IRS red flags....but is this even a legitimate concern for only $650 in income on that trust EIN?

Unexpected 1099-INT after final 1041 was filed.

 
kmd
Level 3

Unexpected 1099-INT after final 1041 was filed.

Thank you.  What about the fact that I originally did a 1041 fiscal year?  So, that fiscal year covered the day of my mother's passing (9/16/2020) through 8/31/2021.  So, then can I just out of the blue switch to calendar year 2022?  If I don't taxes are technically late.  So, if I call the time fiscal year 9/1/2021 through 8/31/2022, then the 1041 should have been filed 12/15/2022 for the fiscal year.  Is there then a penalty for them being late?  Should I just switch to a calendar year? 

 

The other complexity - that surprise bank account bled into 2023 - I wasn't able to pull it until the end of January, so there's going to be maybe $40 in interest on a 1099-INT for the trust next year in 2023.  Ugh.  Thing is, I checked "final" on the form for the first one, and now I'm looking at filing two more times?

 

I really don't want to red flag this trust because of this unexpected 1099-INT.  But this must happen to other people where they thought a final 1041 was not final?  Up until now, I was pleased with how smoothly it all went - I filed the 1041, issued K-1s, distributed money, and thought I was done....

 

Thank you,

 

Kathryn [PII removed]

Unexpected 1099-INT after final 1041 was filed.


Unexpected 1099-INT after final 1041 was filed.

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