Irrevocable trust will terminate spring, 2022. When do I file the final 1041?

[smac2]

I am the sole beneficiary and trustee for an irrevocable trust and I am filing a 1041 this April for the 2021 year. However, the trust will terminate in May 2022 so my question is: do I file a short year return after the trust terminates using the turbotax program for 2021 or do I wait till 2023 to file the final return using next year's program? 

[TomT73 · Accepted solution]

I assume that the trust's tax year is the calendar year. First of all, be sure to file any final estimated tax payments once the trust terminates. That would probably be the June 15th filing date. Then, since the short-year trust income is reportable for 2022, I would use the 2023 TurboTax program to complete and file the trust's final return for the 2022 year.

FYI, the instructions for Form 1041 for 2022 include this:

"Excess deductions on termination.

Under Final Regulations - TD9918, each excess deduction on termination of an estate or trust retains its separate character as an amount allowed in arriving at adjusted gross income, a non-miscellaneous itemized deduction, or a miscellaneous itemized deduction.
Box 11, code A, was revised to read Excess deductions–Section 67(e) expenses and a new Box 11, code B, Excess deductions–Non-miscellaneous itemized deductions, was added.

See Box 11, Code A Excess Deductions on Termination - Section 67(e) Expenses and Box 11, Code B Excess Deductions on Termination - Non-Miscellaneous Itemized Deductions later, for more information."

The full instructions on the IRS website (Google "Form 1041 instructions") do not appear to address trust termination filing deadlines. You may wish to consider filing as soon as possible after the 2023 TurboTax edition is released.

This answer is for guidance only, and should not be considered professional advice as defined in any jurisdiction's law or regulation. For authoritative advice, consult a licensed tax professional.