Solved: How to handle the trustee fee correctly?
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
easyxpress
Level 3

How to handle the trustee fee correctly?

This is an irrevocable Trust and has its own TIN. I read that the Trust is not treated as a business, so there's no need to issue 1099-MISC to the trustee regarding the fee. Then, how is this fee reported to IRS (or not)?

2 Best answer

Accepted Solutions
tagteam
Level 15

How to handle the trustee fee correctly?


@easyxpress wrote:

....how is this fee reported to IRS (or not)?


Trustees who receive trustee fees from trusts must report the fees regardless of whether or not they receive tax reporting statements such as Form 1099-MISC.

View solution in original post

tagteam
Level 15

How to handle the trustee fee correctly?


@easyxpress wrote:

Since 1099-MISC won't be used, reporting the trustee fee becomes a honest system?


Yes. In fact the entire federal income tax system is based upon voluntary compliance.

View solution in original post

12 Replies
tagteam
Level 15

How to handle the trustee fee correctly?


@easyxpress wrote:

....how is this fee reported to IRS (or not)?


Trustees who receive trustee fees from trusts must report the fees regardless of whether or not they receive tax reporting statements such as Form 1099-MISC.

View solution in original post

easyxpress
Level 3

How to handle the trustee fee correctly?

Sure. My question is actually concerning the Trust side (not the trustee). Is there a proper way for the Trust to report the trustee fee to IRS? So IRS can match the income for the trustee. Since 1099-MISC won't be used, reporting the trustee fee becomes a honest system?

 

Anonymous
Not applicable

How to handle the trustee fee correctly?

Since it isn't a business the issuance of a 1099 isn't required though nothing prevents the trust from issuing one.  it is the recipient who has responsibility for reporting the income even though no 1099 is issued. 

tagteam
Level 15

How to handle the trustee fee correctly?


@easyxpress wrote:

Since 1099-MISC won't be used, reporting the trustee fee becomes a honest system?


Yes. In fact the entire federal income tax system is based upon voluntary compliance.

View solution in original post

Carl
Level 15

How to handle the trustee fee correctly?

Just because a trust is not required to issue a tax reporting document, does not mean the trust is forbidden from doing so. Trusts issue 1099-MISCs all the time for expenses paid out of the trust - especially fees paid to the trust administrator.

 

tagteam
Level 15

How to handle the trustee fee correctly?

I do not believe anyone in this thread stated that trusts are prohibited from issuing 1099-MISC forms.

 

The fact remains, however that trusts do not "issue 1099-MISCs all the time for expenses paid out of the trust" (I have no idea how that statement could be either verified or corroborated as the typical trust is private).

 

Regardless, it is clear that the IRS intended the form to be used only for trade or business reporting with extremely limited exceptions.

 

Trade or business reporting only.

Report on Form 1099-MISC only when payments are made in the course of your trade or business.

Anonymous
Not applicable

How to handle the trustee fee correctly?

read my previous post. it provides the answer you are seeking. 

tagteam
Level 15

How to handle the trustee fee correctly?


@Anonymous wrote:

read my previous post. it provides the answer you are seeking. 


I hope you are not responding to my post because I actually read other posts in threads and read your post as well. Apparently, many others do not follow suit.

FDaras
New Member

How to handle the trustee fee correctly?

How does a Trustee report the fees they collected? Since it's an "honor" system and the trust isn't going to issue a 1099 where on the 1040 is the income documented? 

MaryK1101
Expert Alumni

How to handle the trustee fee correctly?

If you do not act as Trustee as a trade or business, you will report it as Miscellaneous Income - Other Reportable Income.  This will include it on Schedule 1.  Because it is not a trade or business, you do not have to pay self-employment tax on it.

 

@FDaras

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
easyxpress
Level 3

How to handle the trustee fee correctly?

When the Trustee is in trade or business? 

tagteam
Level 15

How to handle the trustee fee correctly?


@easyxpress wrote:

When the Trustee is in trade or business? 


That would depend upon the facts and circumstances particular to your situation.

 

Generally, however, if you act as a trustee on a regular and continuous basis for fees and/or commissions, doing so would rise to the level of a trade or business (and require reporting other than as miscellaneous income).

Dynamic AdsDynamic Ads
v
Privacy Settings