K-1 does not equal distributions from an irrevocable trust

[user17736155851]

Trustee pays four distributions of dividends and other passive income.  K-1 is issued by Trustee.  Should the annual sum of the distributions equal to the sum of the taxable income on the K-1? 

[DavidD66]

Not necessarily.  It depends on what type of trust and the requirements and restrictions of the trust.  The trustee, or whomever prepared the tax return should be able to provide you with a reconciliation of the trust income and distributions.

[user17736155851]

thank you..I see what you are saying..but it does not make sense why my K-1 taxable income is much higher than my distributions.  I am literally paying taxes for income that I did not receive.  Does that make sense to you?

[DavidD66 · Accepted solution]

In general, distributed income is taxable to the beneficiaries (via Schedule K-1), and the trust pays taxes on on any income retained by the trust.   A Complex trust can treat distributions made with in the first 65 days of the year as having been made the previous year.  So, if the trust in question is a complex trust then there may be a timing issue causing the issue.  

Simple Trusts are required to distribute all trust accounting income (interest and dividends) in the current year.  Some tax software will assume the income is distributed as required; however, that doesn't mean the income actually gets distributed.  The broker/dealer may not have paid out the income to the executor or the beneficiaries.

It sounds like you need to have a conversation with the executor.