Irrevocable Trust tax return

[Derick W]

What forms need to be filed to file for a irrevocable trust tax return? And what Turbo Tax product is needed to file an irrevocable trust?

[VolvoGirl]

That is form 1041.  You need Turbo Tax Business.  It  is a separate program from Home & Business.  It is not available to do online or on a Mac.  And it will not do your personal 1040 return.

You can buy the Window's version here…..

TurboTax® Business Desktop 2023-2024 | Tax Software Download

[Mike9241]

are you sure it's irrevocable? Even a trust with that term in its name can be grantor trust which may still need to file a 1041 but no k-1 is issued. Rather a grantor trust letter.

A trust is considered a grantor trust if the grantor retains certain powers12:
To change the trust’s beneficiary.
To borrow from the trust.
To change the assets in the trust by substituting assets of equal value.
To pay life insurance premiums from the trust’s income.
A reversionary interest of more than 5% of the trust property or income.
The power to revoke the trust and/or to return the trust’s corpus/principle to the grantor.
The power to distribute income to the grantor or grantor’s spouse.
A grantor trust is any trust that allows the grantor to retain full control over any investments or other assets held inside of the trust3. The grantor can make changes to the trust and the assets inside the trust as long as they are competent to do so3. A “grantor trust” is a trust in which the grantor (or some other person) retains control over the trust to such an extent that the grantor (or such other person), rather than the fiduciary or beneficiary, is treated for federal income tax purposes as the owner of all or part of the trust4. Grantor trust rules also state that a trust becomes a grantor trust if the creator of the trust has a reversionary interest greater than 5% of trust assets at the time the transfer of assets to the trust is made

[Derick W]

Yes, it’s an irrevocable trust in which I am the trustee. It was a revocable grantor trust, but the grantor passed away. 

[Mike9241]

Follow @VolvoGirl  instructions. I ask because many don't know that a so-called irrevocable trust can be a grantor trust. 

[Derick W]

Which state forms need to be filed for the trust in CA?

[DaveF1006]

That would be California Form 541. If you are preparing the return in Turbo Tax Business, select the State Taxes Tab and Form 541 will generate for you upon purchase for the state product.

@Derick W 

[Derick W]

Thank you!

Do you know the CA tax brackets for irrevocable trust income? Also, do they provide tax percentage breaks for LT capital gains or qualified dividends like the Fed does?

[Cynthiad66]

CA trust tax brackets:
This is broken down as follows:

2023 Tax Rate Schedule

If the amount on Form 541, line 20a is:
over –	but not over –	Enter on line 21a:	of the amount over –
$0	$10,412	$0.00 + 1.00%	$0
10,412	24,684	104.12 + 2.00%	10,412
24,684	38,959	389,56 + 4.00%	24,684
38,959	54,081	960,56 + 6.00%	38,959
54,081	68,350	1,867.88 + 8.00%	54,081
68,350	349,137	3,009.40 + 9.30%	68,350
349,137	418,961	29,122.59 + 10.30%	349,137
418,961	698,271	36,314.46 + 11.30%	418,961
698,271	AND OVER	67,876.49+ 12.30%	698,271

Although irrevocable trusts distribute income to beneficiaries, it is responsible for paying capital gains taxes.

@derric 

[Edited 2/21/2024 | 2:37PM PST]

[Derick W]

I found a different set of tax brackets for form 541 and CA taxes. Where did you get your brackets from? They look like the federal tax brackets.