For final 1041, How get 403b & Defined Compensation final distributions into TurboTax both the gross distributions AND income taxes for K1's

[djrusch]

Filing a final 1041 Trust return in 2024. Received 403b & Defined Compensation final distributions to the Trust in '24. Using TurboTax Business Mac desktop version (dry run using 2023 TTax) . Where do we enter the Gross income to get it allocated to beneficiaries?  Where do we enter associated  each Fed & State income tax withholdings and how do we get that allocated to beneficiaries for each Fed & State?

[tagteam]

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@djrusch wrote:

......Using TurboTax Business Mac desktop version...

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You're using what?

TurboTax Business does not have a Mac version.

Are you using Home & Business. If so, that product does not support Form 1041.

[djrusch]

you are correct, I'm on PC windows 10 with TTax Business.

Questions remain.

Thanks

[tagteam]

I'm going to page @dmertz for the 403(b) issue but note that you cannot allocate (pass through) withholding to the beneficiaries with the exception of backup withholding.

Also, it is the taxable income with which you need to be concerned.

[dmertz]

The taxable amount is to be reported as Other Income to appear on Form 1041 line 8.  It can then be treated as DNI, reported on the beneficiaries' Schedules K-1 Box 5, Other Portfolio and Nonbusiness Income.

Tax withholding other than backup tax withholding is not permitted to be passed through to beneficiaries.  (The taxes that were withheld in this case are not backup withholding.)  Because of this, unless the trust will be paying taxes, taxes should generally never be withheld on income paid to a trust.  The tax withholding will be refunded to the trust.  The trust will need to remain open to receive this refund which can then be distributed to the beneficiaries.

[djrusch]

What is DNI? Where do we make an entry in TTax to get the distributions onto line 8 of 1041?

How do we know the Fed & State income taxes are not backup withholding?

How do we know the taxes will be refunded to the trust by Fidelity who had both 403b & defined comp plans?

Do you have any reference we can take to Fidelity to prove they need to refund us the $? I bet they've already sent the withholdings to IRS & CA FTB.

It would be down right painful to have to wait until 2025 to get the taxes back to the trust and keep the estate open for another year for this item

[tagteam]

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@djrusch wrote:

What is DNI? Where do we make an entry in TTax to get the distributions onto line 8 of 1041?

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If you are not familiar with trust/estate income tax returns (1041) or the concepts involved, you really should seek guidance from a local tax professional.

See https://taxexperts.naea.org/expertdirectory

DNI is a basic term which stands for Distributable Net Income (for which the trust gets an income distribution deduction when distributed to beneficiaries).

You would enter the taxable amount during the Step-by-Step interview shown in the screenshot below.

[tagteam]

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@djrusch wrote:

How do we know the Fed & State income taxes are not backup withholding?

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You would have received some sort of notice in most instances.

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@djrusch wrote:

It would be down right painful to have to wait until 2025 to get the taxes back to the trust....

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Unfortunately, there are no other options; as @dmertz stated, the trust itself will have to receive the refund.

[dmertz]

Backup withholding:

https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding