Retirement tax questions

Yes, you can file a first and final estate return, Form 1041.

Whether the estate pays the tax, or whether it must be distributed to the beneficiaries is based on how the estate was set up. If there is no language about that then you can choose. If, in fact, the estate does pay the tax then there is nothing to enter on the K-1s, and the beneficiaries will have no income to report.

Unless the amount involved is small, it's usually beneficial to pass the income through due to the increasing tax brackets of the estate.  Currently, the estate is taxed at 10%-37%.  Income at or above $13,050 is taxed at the highest rate, based on the current instructions.

• IRS Instructions for Form 1041 (the 2021 version is in draft at this time however the link will work when finalized)