topic How to handle the trustee fee correctly？ in Business & farm

How to handle the trustee fee correctly？

easyxpress — Fri, 04 Sep 2020 02:43:48 GMT

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)?

Re: How to handle the trustee fee correctly？

Anonymous_ — Fri, 04 Sep 2020 03:09:57 GMT

@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.

Re: How to handle the trustee fee correctly？

easyxpress — Fri, 04 Sep 2020 04:35:24 GMT

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?

Re: How to handle the trustee fee correctly？

Anonymous — Fri, 04 Sep 2020 05:18:27 GMT

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.

Re: How to handle the trustee fee correctly？

Anonymous_ — Fri, 04 Sep 2020 05:44:13 GMT

@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.

Re: How to handle the trustee fee correctly？

Carl — Sat, 05 Sep 2020 14:06:41 GMT

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.

Re: How to handle the trustee fee correctly？

Anonymous_ — Sat, 05 Sep 2020 17:34:46 GMT

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.

Re: How to handle the trustee fee correctly？

Anonymous — Sat, 05 Sep 2020 22:12:23 GMT

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

Re: How to handle the trustee fee correctly？

Anonymous_ — Sun, 06 Sep 2020 00:29:15 GMT

@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.

Re: How to handle the trustee fee correctly？

FDaras — Sat, 23 Jan 2021 19:41:48 GMT

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?

Re: How to handle the trustee fee correctly？

MaryK4 — Sun, 24 Jan 2021 19:07:07 GMT

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

Re: How to handle the trustee fee correctly？

easyxpress — Sun, 24 Jan 2021 20:29:41 GMT

When the Trustee is in trade or business?

Re: How to handle the trustee fee correctly？

Anonymous_ — Sun, 24 Jan 2021 20:32:25 GMT

@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).

Re: How to handle the trustee fee correctly？

techs — Mon, 07 Mar 2022 01:08:29 GMT

@easyxpress wrote:
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 this is a stale thread, I hope you got your answer another way. The responses marked "best answer" in this topic aren't even responsive to the questions asked, IMO. As far as I can tell, "how does the trustee report compensation received on an individual 1040?" was clearly and correctly answered by @MaryK4 on 24Jan21. I believe the answer to the question "how does the trust report compensation paid?" is that it will be shown* as a deductible expense on the trust 1041. How the IRS might connect the two, I'm not sure — but they are at least clearly disclosed and traceable to each other this way when a 1099 is not issued.

*TT2021 interview was no help with this — I turned up another user tip about where and how to make a manual/form entry.

Re: How to handle the trustee fee correctly？

Anonymous_ — Mon, 07 Mar 2022 01:28:52 GMT

@techs wrote:
Since this is a stale thread, I hope you got your answer another way. The responses marked "best answer" in this topic aren't even responsive to the questions asked, IMO.

Here is the original question:

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)?

The original poster was already aware that the trust could deduct the fee paid to the trustee and merely wanted to know how the fee gets reported to the IRS when a tax reporting statement (e.g,, a 1099-MISC) is not required.

Try reading the first post in this thread before offering your opinion on what is not the "best answer".

Filing amended final 1041 for 2025 after original final done in 3020 by TurboTax

ron6612 — Sun, 15 Feb 2026 15:16:49 GMT

You had helped me with this last year and have folow up question.

As fiduciary I prepared final 1041 in 2020 for my mother after she passed. Five years later received unclaimed property from NJ and 1099 for $5000 interest income for those unclaimed years. The 1099 was sent to social security number of mother not ein of estate and NJ will not correct it. I know I can do the amended 1041 for 2025 reporting interest to ein of estate with explanation letter. The cash expenses were 3500 for legal probate fees and taxable income would be 1500 with 1041 tax due at $150. However would not want to prepare k1 if possible to me. The 1500 was kept by me as fiduciary and tax preparer. I spent something like 20 hours dealing with attorney on probate, NJ state in filing for unclaimed property and getting documents prepared, etc.

Can I just show the 1041 as 1500 net income with 150 tax due and leave it at that (preferred) or do I have to deal with potential k1 preparation and then consider deducting my time which could be 2000 and then a 500 1041 loss and more k1 issues to deal with?

Just want to make this simple if possible and not have to deal with the k1 situation.

Help Please

Re: Filing amended final 1041 for 2025 after original final done in 3020 by TurboTax

techs — Sun, 15 Feb 2026 17:46:24 GMT

It sounds like you are seeking tax advice more than software advice, and that is way out of my pay grade.

What occurs to me from the software side is that if you are still filing 1041s for the estate/trust then producing a K-1 is really no sweat at all. If the trust/estate received $5000 taxable income in 2025, I assume NJ reported that income to IRS and it sounds like you have accounted for the income as deductible trust expense — but you are supposed to tell IRS about it... And if you received $1500 as fiduciary, IRS thinks that income should show up on your 1040 — a K-1 would be the ordinary way to do that AFAIK.

I don't really understand your proposed/preferred solution — if the trust/estate received the money, it could just file and pay the tax — but with no K-1 the trust would not get the fiduciary deduction and you could not receive the fiduciary fee...? Right? I'm not sure how complex it would be to complete a paper 1041 and K-1 for this single item of Line 1 interest income and the deductions on Line 12/14 without the hassle and expense of the software. At a glance, it doesn't seem like much.

If you really did report a final (you thought) 1041 for the estate in 2021, that really does sound like a tax advice question. I have no experience with a closed EIN.

Re: Filing amended final 1041 for 2025 after original final done in 3020 by TurboTax

techs — Sun, 15 Feb 2026 18:12:05 GMT

Thinking a little more about OP presentation, I'm not clear whether the $3500 probate/legal and $1500 fiduciary expenses described are expenses incurred in 2025 — related to the recovery and interest income received in 2025 from NJ — or are they previously unclaimed expenses carried forward from estate settlement activity years ago?

If the latter (old expenses amending a 2020 1041 on the basis of 2025 income), that goes back to tax advice — I have no idea how that works.

Re: Filing amended final 1041 for 2025 after original final done in 3020 by TurboTax

ron6612 — Sun, 15 Feb 2026 18:20:47 GMT

The legal and fiduciary fees were all attributable to receiving the unclaimed property from New Jersey in 2025. The attorney had to do probate filing and I had to deal with NJ, the attorney and family to get notaries done.

Re: Filing amended final 1041 for 2025 after original final done in 3020 by TurboTax

techs — Sun, 15 Feb 2026 19:32:18 GMT

Okay, then thoughts in my first response stand. Seems like you need 2025 1041, K-1, and 1040 to account for the interest income (to trust EIN and and to fiduciary SSN). Too bad you didn't pick up professional tax advice on how to handle the time lapse while dealing with the recovery.

A reminder for me to not report final just because the next year has no reportable income — seems simpler to let it hang until confident all the shoes have dropped. Best wishes for a simple resolution.