Parent died end of Jan2015. Assets were not transferred to beneficiaries, per will, till April. Investments increased value from DoD till distribution, then THAT increase is considered income (long or short term) and is taxable on the 1041, yes? But prior to Death, SocSec and some annuity/pension was received and indicated on Final 1040 & state. All correct so far? Then the 1041 will show on the K-1 Forms the funds that were inherited and passed thru to beneficiaries...is that also correct. So there may be some Estate Taxes (fed & state) on 1041 from Date of Death till funds transfer, and Final 1040 and state taxes paid for the part of year PRIOR to death...all correct? Estate is well under $1M so no taxable estate.
"Estate is well under $1M so no taxable estate." Not taxable for Federal, but perhaps for State.
@dick3337 dick3337 please disregard earlier comment by another poster
@guybo60
Who are you? You've bounced into a specific thread of discussion that started with the Original Poster's very specific question about a dilatory filing of a Form 1041 and specific monetary amounts in respect to the OP's situation.
If you have a question about Form 1041 - start a question and provide whatever relevant information that would explain what it is you are trying to do, Simply saying "do i still file a 1041?" does not even establish the basic situation you are dealing with.
Thanks Scruffy, just trying to get answers. Mom's DOD was 10/15/15. I filed her 215 income tax. She owed nothing. Exact numbers from 1040 are income: interest $996, dividends $37, IRA distribution $3692, Pension $1560, S.S benfits $16809, . Turbo tax figured total income as $6285. Do I need to file a 1041 because most of the interest and pensions, and Ira distribution were before her death?
@guybo60 PLEASE! Submit this as a new question as stated! Sorry but trying to add this here is just going to add confusion to anyone else reading!
@guybo60 you have not yet posted that question - Please state your question as a new original posted question - adding it here just adds confusion to anyone reading
@guybo60 Just a note that a day has passed without response from you. Case closed.
All income received up to the date of death at the end of Jan2015 should be reported on the Decedent's final Form 1040. Indicate deceased and date of death. So your comment about income is correct with one critical error. Social Security legally attempts to recapture any Social Security benefits paid in the month of death and any thereafter, usually by a direct debit to the account of deposit.
Since the assets were not transferred to beneficiaries for several months and income accumulated until April, any ordinary income such as interest or dividends and any gain which is realized by the sale of assets must be reported on a Form 1041 for the Estate. Any gain realized in assets of an Estate, or as inherited by the Beneficiaries, is always considered Long-Term, irrespective of how long actually held. So you comments there are correct.
The filed Form1041 if final, as all assets were distributed, should be indicated as final at the beginning of the Interview and on the 1041. All assets were distributed, so you would see that not only is ordinary income reported on the Schedules K-1 but the realized gains and even the realized losses, net amount, will be reflected on the Schedules K-1. Any other deductible expense such as investment interest, or credits such as Foreign Tax paid, will also transfer to the K-1's. Again, your comments are correct.
The Estate is not large enough to be liable for Federal Estate Tax unless very sizable Lifetime Gifts were made, which would reduce the exemption. Depending on state of residency, there may be a state-level Estate Tax. Estate Tax, if due, is not reported on Form 1041 - please note this. If it were Federal, it would be on Form 706. If there is a state Estate Tax, it would be on the relevant state form. Estate Tax is not part of the Income Tax system. All assets including received income and all investment assets or personal residence are valued at a "stepped-up" amount - the Fair Market Value on the date of death.
If your Estate gross Income is less that $601, you don't have to file an Estate tax.
But you may have to if you want to issue K-1 to beneficiaries.
OK.
See paragraph two here which is what I relied on.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Filing-the-Estate-Income-Tax-Return-Form-1041">https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Filing-the-Estate-Income-Tax-Return-Form-1041</a>
True tagteam, but if the Estate did distribute all income and all gains, then although a Form 1041 should have been and needs to be filed, since no tax is due, even a late filing of the Form 1041 will result in neither penalty nor interest assessed. However, that leaves the question of what the Beneficiaries did or did not do in order to have a timely filing
True but frankly I have not seen the IRS make these assessments for Estates that were under $1 million or more - The IRS almost ignores Trust and Estate filings of small dollar amount. - Check my comment elsewhere about just how bad it is.
@tagteam A close friend of mine was until retirement the Lead or Senior Agent in the Estate Tax and Trust division. I brought to him the following true example of just how poorly the Service handles 1041 filings.
An attorney for a family [yup, another one who should never touch estate work] set up bypass marital trusts for a couple. He filed SS-4's for the two Revocable Living Trusts and received CP-575's for them. [Don't comment, I know!] He then had the couple transfer their assets in to accounts registered in the names of the trusts and the account registrations at brokerages and mutual funds used these EINs and not the personal SSNs.
For 20 or more years Forms 1099-DIV/INT/B were filed against the EINs and not against the SSNs. For 20 years or more no 1041s were filed [yes I know, in fact as disregarded entities, but you get the picture]. For 20 years the Service never questioned the sizable income being reported by payers with no corresponding filings of that income.
I got involved when the first of the couple passed away and the attorney attempted to file a Form 1041 using the EIN. I spent at least a month with Ogden Entity Division getting the EIN reactivated - as the Service deactivated the EIN for lack of filing but never ever chased the income!