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Matilda
Level 3

Completing short final 1041(Estate) Tax for fiscal Tax year ending in 2022

I feel I need to provide background :

I am handling two estates - My brother's and my father's.  My brother passed away June 2018, my father January 2019.  Not realizing the timing difficulties it would cause, I chose a fiscal calendar year for my brother ending 5/31 of the tax year, My dad's tax year ends 12/31.  My brother had a couple 401Ks with no beneficiaries that had to be cashed out entirely within 5 years. No spouse, no kids, so these 401Ks were to be inherited by my father's estate then passed on to his heirs. In order to spread out the tax burden to my father's heirs , I decided to cash out the 401K's  in different tax years.

The first 401K was cashed out in July of 2020.  My brother's estate distributed the cash to my father's estate in July 2020, and my father's estate then distributed to his heirs in July 2020.   This put the distribution on my brothers 1041 for tax year 2021 (6/1/20-5/31/21), and generated a K1 for my father that will be reported on his 2021 taxes.  My father's heirs will receive a K1 from him also for their 2021 taxes.  So even though my father's estate received the cash in July 2020, and distributed it to his heirs, both my father's estate and his heirs will not receive a K1 until tax year 2021.

The second 401K was cashed out in July 2021.  Same process.  The distribution will be reported on my brother's estate 2022 1041, The resulting K1 on my father's estate 2022 1041, and the resulting K1 on my father's heirs' 2022 1040s.

 

I just finished my brother's 2021 1041 (Tax year ending 5/31/21 due sept 15 2021) - I assume this is considered tax year 2021 but I had to use Turbotax 2020.  I am ready to now close my brother's estate and want to do his final 1041 (Fiscal Tax year 6/1/21-5/31/22) that will include the second 401K.  I do not want to wait until 2022.

 

Now for the questions - I only have Turbotax 2020 - can I use that for a fiscal year 2022 return?

Assuming I can, and I do the final return in Oct 2021 (Fiscal tax year 6/1/21-5/31/22), will the K1 be for tax year 2022?  So even though I would send the K1 to my father's estate in 2021 his estate would not report it on 2021 taxes, and would wait until 2022?   Then his heirs would not be taxed until 2022?

 

If the K1 that is sent in 2021 for my brother's fiscal year ending 2022 has to be reported on my fathers 2021 1041, I will have to wait to complete the final return.  I need the 401Ks in different tax years.

 

Thank You

 

 

2 Replies
MMTaxMM
Level 10

Completing short final 1041(Estate) Tax for fiscal Tax year ending in 2022

Now for the questions - I only have Turbotax 2020 - can I use that for a fiscal year 2022 return?

Assuming I can, and I do the final return in Oct 2021 (Fiscal tax year 6/1/21-5/31/22), will the K1 be for tax year 2022?  So even though I would send the K1 to my father's estate in 2021 his estate would not report it on 2021 taxes, and would wait until 2022?   Then his heirs would not be taxed until 2022?

You can't use a 2020 version of TT to do a return with a fiscal year that begins in 2021 and ends in 2022.

The K1 will be for the 2022 tax year and anyone including the estate would report that K1 on a return for the 2022 tax year......heirs are taxed in 2022.

With the complex nature of this deal you should really look for a tax pro and at least get some pro guidance.

Matilda
Level 3

Completing short final 1041(Estate) Tax for fiscal Tax year ending in 2022

I didn't think I could use the 2020 form for 2022, but I hoped maybe I could so I could get these estates finished.   I will just wait to file taxes until next year then it becomes far less complicated.  It will be just like what I am already doing for this year.  Thanks

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