K-1 needed when income threshold not met

[bschmitz95]

I am the fiduciary for a personal Trust whose assets were fully distributed in 2023, and a final return was filed for that year. The entity had a refund on its 2023 taxes. In that the IRS took a bit of time issuing the refund, they paid an additional $474 in interest. I received a letter from the IRS indicating this interest could be taxable.

In that the Trust was fully distributed in 2023, this $474 was its only income in 2024. I know this amount is below the $600 threshold for needing to file a 2024 return for the Trust, but I distributed this amount to the two U.S. beneficiaries, who I presume will need to report this on their personal returns.

If this is so, it seems the I will need to file a 1041 for the Trust even though the income threshold was not met, so I can produce the K-1 forms for the beneficiaries.

Am I correct in this line of thought?
Thank you.

[DianeW777 · Accepted solution]

No, a Form 1041 is not required to be filed and you did finalize that trust in 2023.  Here is the simple solution to have the interest reported to the correct persons/beneficiaries. 

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 yourself 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-INT

[bschmitz95]

Thank you so very much for your very clear answer!