Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
Foster48
Level 2

Tax liability on k-1 income (interest and dividends) not received

I am a beneficiary of a trust that is producing an income.  I received k-1's from the trust showing income as interest and dividends.  I understand I must pay taxes on these.  I have not received these as a distribution in the year 2020.  If I pay taxes on the income, why am I paying on income not received?

2 Best answer

Accepted Solutions
gloriah5200
Expert Alumni

Tax liability on k-1 income (interest and dividends) not received

You will be paying taxes on the income, but it is considered income that is "credited to your account" for your benefit in the trust, whether you take the  money out in the current year or not.

View solution in original post

gloriah5200
Expert Alumni

Tax liability on k-1 income (interest and dividends) not received

The trust generally has a higher tax rate than the individual beneficiary so it would use up the trust money faster and it wouldn't be there for you later.

 

You are at a lower tax rate and the beneficiary paying the taxes is a money-saver in the long run.

 

The trust agreement generally has rules and guidelines to follow distributions and taxation, etc.

 

:[Edited 04/05/2021|7:31 pm pst]

View solution in original post

3 Replies
gloriah5200
Expert Alumni

Tax liability on k-1 income (interest and dividends) not received

You will be paying taxes on the income, but it is considered income that is "credited to your account" for your benefit in the trust, whether you take the  money out in the current year or not.

View solution in original post

Foster48
Level 2

Tax liability on k-1 income (interest and dividends) not received

Would it be better for the trust to pay the taxes on this income rather than the beneficiary?

gloriah5200
Expert Alumni

Tax liability on k-1 income (interest and dividends) not received

The trust generally has a higher tax rate than the individual beneficiary so it would use up the trust money faster and it wouldn't be there for you later.

 

You are at a lower tax rate and the beneficiary paying the taxes is a money-saver in the long run.

 

The trust agreement generally has rules and guidelines to follow distributions and taxation, etc.

 

:[Edited 04/05/2021|7:31 pm pst]

View solution in original post

Dynamic AdsDynamic Ads
Privacy Settings
v