1099R: family trust is recipient; can sole beneficiary just report as income on 1040?

[talkingpapaya]

Hi,

Spouses deceased parents had a family trust. Both parents deceased several years ago. Spouse is sole beneficiary of trust.

One account was closed in 2024, and a 1099R was sent with trust as recipient. This is the first activity of the trust in years. Do we really need to file a return for the trust? Or, can we just claim what's in box 2a as personal income on our personal 1040? 

[DianeW777]

Yes, you can claim the income from the 1099-R on your tax return. If you want the IRS to know where to look for this income you can also do a nominee procedure that will clarify it for them.

Nominee Returns.  This is how the IRS knows what you are doing.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list the trust as the payer and the other owner, as the recipient. On Form 1096, list the trust as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here: 

• Form 1096
• Form 1099-R

[talkingpapaya]

Thank you! Very helpful.

You state, " If you want the IRS to know where to look for this income ..." does that mean this nominee procedure is optional?

Thanks, have a nice day!!

[DaveF1006]

Yes, this nominee procedure is optional, but we need to talk about what kind of trust this is before you decide how to report this. Here are some additional considerations that may need to be made. These considerations are made according to how the trust is structured.

1. If the trust is irrevocable, the trust needs to file a 1041 trust return and issue a Schedule K-1 to each beneficiary.
2. If the trust is revocable and has been treated as part of the deceased parents' estate, the income may be reported directly by the beneficiary.
3. There is a nominee procedure that allows the beneficiary to report the income on their personal return, but it requires filing additional forms as DianeW777 explains.

So to elaborate on your question, if the trust is revocable, you may report this income on your own return or use the nominee procedure as DianeW777 mentions.

@talkingpapaya