Hello, I am doing a relative's taxes. She has dementia and is in a memory care facility. I have already filed her Federal and PA returns. She also established a "Grantor Trust" "Irrevocable Trust Agreement" last year. My Wife is POA and Trustee (I am Successor Trustee). The Trust has an assigned EIN. The Asset Holder, a Bank, issued the Trust 1099-INTs to the Recipient's TIN = Trust EIN.
My understanding is that I need to additionally buy TT Business and file a 1041 U.S. Income Tax Return for Estates and Trusts, using the Trust EIN, reporting the 1099-INTs and Interest, and pay any taxes owed from the Trust accounts. Is that correct?
Also, for PA, do I file the PA-41 and is that also only accessed through TT Business?
Thank you.
Not tough if it's a grantor trust. File a 1041 and a PA-41 with a grantor letter and that gets reported on her individual tax return. The 1041 is all zeros but the grantor letter has all the income to be reported on her return.
Is the Grantor Letter generated by TurboTax Business? If not, how is it generated? Thanks.
Yes, it's a form in the TurboTax return. It is called the Grantor Information Statement. It gets generated after specific information is reported in your return.
Once you choose the entity type, the statement is created right away. Early on, you’ll see a screen called “About This Trust.” Choose “Grantor Type Trust” here. As you enter interest, dividends, or capital gains in the Business program, these amounts won’t show up on the main Form 1041—they’ll mostly stay blank. Instead, TurboTax adds them to a supporting document called the Grantor Information Statement (GIS).
Even though it's a Grantor Trust, you must "distribute" the income to the grantor in the software. Go to the Beneficiary/Grantor Information section.Ensure the Grantor is listed with their SSN. Set the Grantor Percentage to 100%. If this percentage is missing, the software won't know who to address the statement to, and it may not generate.
Now go to the forms mode in your program. Click the Forms icon (top right corner of the Windows program). In the left-hand list of forms, look for "Grantor Information Statement." If the trust has income but this form is blank, check your "Grantor Percentages." If missing, go back to the Beneficiary/Grantor Information section and enter the percentage there.
Does this statement get included in the TurboTax efiling?
No, the Grantor Letter is sent to the Grantor only; it isn't part of the IRS tax return.
So does that imply we can't file online an informational trust return since I believe we need a statement that the earnings will be filed with the grantor's return.
The information from the grantor's trust that makes up the statement that you are sending to the person who is receiving the grant from the trust is all in the return that you submit through TurboTax. The actual statement that goes to that person does not also go to the IRS. The IRS just needs the numbers, not the statement. So if you use TurboTax to prepare your grantor's trust you'll have everything that you need.