Fiduciary Information Worksheet: Fling Required must be entered for electronic filing

[NorbertD1]

This is getting flagged when I run error check on my return.  The return is for a complex trust with no income, but there were distributions (of income from prior years).  It looks like it wants me to select which forms (720? 940? etc) need to be filed for 2020?  Shouldn't TT be telling me that?

[tagteam]

You are going to have to provide more details about the type of income distributed and what and how you entered information about the distribution.

Form 720 is an excise tax return and Form 940 is an unemployment tax return, neither or which is even included in TurboTax Business.

[NorbertD1]

Thanks for the help.

The income is royalty income, earned in prior years.  There was no income earned in 2020.  Because of this, under "Was All the Trust's Income Distributed?" I had to select "No, the trust distributed a different amount" and entered the amount distributed.  I entered it as "second tier", though I'm not certain that's correct.  I chose that because the trust does not require any distributions.  However, there are no questions about the source of this income.  Is there a better way to indicate distribution of income from prior years?

[tagteam]

If you are the fiduciary, you can track these types of distributions outside of TurboTax (and you should do so).

Technically, if the trust received no income, a Form 1041 would not be required to be filed and you could simply distribute whatever amounts you have the authority to distribute (or are required to distribute) to the beneficiary(ies).

[NorbertD1]

I agree that I shouldn't need to file a 1041, but the trustee does need a K-1 for the distributions.  Seems like this shouldn't be such a rare situation, that the trust holds income for a few years and then distributes it later.  Is the answer to just ignore the errors, leave the interview incomplete, and grab the K-1 from forms view?

[NorbertD1]

And how would it work if I did have some income this year (hence needed a 1041), but distributed more than just the income from this year?

[tagteam]

You do not need to file a 1041 merely to report distributions made to beneficiaries of income that the trust earned, and for which the trust paid taxes, in an earlier tax year.

[tagteam · Accepted solution]

If the trust had income this year and was distributing more than the income earned during the tax period, the reporting would depend upon whether the income distribution was mandated by the terms of the trust or whether the distribution was discretionary (i.e., at the discretion of the trustee).

Regardless, amounts actually paid or credited are second tier distributions and reported as such. Amounts of income that are required to be distributed are first tier distributions and the beneficiaries are responsible for any tax due whether the income is actually distributed or not.

K-1s are used to report items of income, gain, credits, and deductions; they are not used to report distributions of trust corpus.

[NorbertD1]

I see, thanks.  I had a fundamental misunderstanding, thinking that I needed to issue K-1s for distributions of past trust income.  But the trust already paid taxes on that income, so the beneficiary doesn't need to.  

[Dan118]

It looks like I'm getting prompted for the same error check, but dont understand the answer.

I am the trustee for a complex trust also.   Did not have to distribute income, but did have secondary distributions.   The trust had income and we did not distribute all of it.

error prompt is for Filing required must be entered for electronic filing.  check what applies

form 720

form 940

form 941

form 943, 944,945,990, 1042, or Bxna.

I dont know what these forms are and how to pick which is required.

[Critter-3]

Form 720 is an excise tax return and all the rest are related to paying employees.  So unless the trust paid excise taxes or had employees none of those forms apply to this trust return.   Either read thru the screens again to see where you could have made an error  AND/OR  seek local professional assistance AND/OR  call TT support for programming assistance. 

[KenFloridaTrust]

Check the very last checkbox "Bxna" (NOT APPLICABLE)