How to File Form 1041 for Estate Tax

How to File Form 1041 for Estate Tax

Form 1041 is the tax return filed with the Internal Revenue Service by the fiduciary of an estate that receives income after a taxpayer dies. If an executor has been appointed for the estate, then the executor is the fiduciary. Estate tax is calculated in much the same way as individual income tax is calculated on Form 1040. However, it is ultimately the beneficiary and not the estate that is liable for tax on any amounts distributed during the tax year.

Instructions

    1

    Determine if Form 1041 must be filed by calculating the estate's gross income for the tax year. Form 1041 must be filed if the estate's gross income during the tax year was at least $600 or if any the beneficiaries are non-resident aliens.

    2

    Download Form 1041 and Form 1041 Instructions from the IRS website.

    3

    Collect all financial records for the estate. These will be useful when calculating tax liability and should be retained in the event of an IRS audit.

    4

    Calculate the estate's total income for the tax year. This amount includes interest income, dividends, business income, rents, royalties and income from any other source worldwide.

    5

    Calculate the estate's allowable deductions. These include compensation to a fiduciary, attorney's fees, taxes paid, deductible charitable donations and various miscellaneous deductions.

    6

    Subtract allowable deductions from total income to arrive at adjusted total income (or loss).

    7

    Subtract distributions to beneficiaries and the estate tax deduction from the adjusted total income to arrive at taxable income.

    8

    Use the tax calculator from Schedule G, line 7 to calculate the total tax.

    9

    Subtract from the total tax any amounts already paid, such as withheld amounts and estimated tax payments, to arrive at total tax due.

    10

    Sign and date the return, and include a check to the U.S. Treasury if taxes are owed. Mail the return to the IRS Service Center that services your area. This information can be found in the 1041 Instructions.



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