FEDERAL TAX FORMS FOR TRUSTEES AND EXECUTORS

If you find yourself as the successor trustee or executor of a loved one’s estate plan part of your fiduciary duty is to file Federal tax returns. Depending on the size of the estate, you may only have to coordinate the filing of a final income tax return or your responsibility could extend to gift tax returns, estate tax returns, or a 1041 return for trusts and estates. So when are these forms required?

1040 -Final Income Tax Return. This form is due on April 15th, the year following death. This return will include all income and deductions before death. This form can also be filed jointly with the surviving spouse. If the deceased individual is due a refund, a form 1310 must also be filed unless the surviving spouse or court appointed executor is signing the return.

1041-Tax Return for Trusts and Estates. This form is due the 15th of the 16th month following the month after death. The fiduciary must file the 1041 form if any beneficiary is a nonresident alien or if income greater than $600 has been generated. The 1041 return is similar to the individual’s 1040 income tax return. If the estate pays the income tax, a beneficiary will not be responsible for paying income as well.

706-Gift Tax Return. This form is due on the earlier date of the final income tax return or the estate tax return. Each individual has an annual gifting exclusion of $14,000. Spouses may each give away $14,000, even if filing jointly. Any gift above that amount in one year is not taxed but is reduced from the current lifetime allowance of $5.45 million. Even if a gift tax is not due, a 706 needs to be filed to keep track of the lifetime allowance exemption. The current gift tax rate is 40%.

709-Estate Tax Return. This form is due 9 months after death. The 709 estate tax return is filed by very few estates because only estates over $5.45 million ($5.49 million in 2017) are required to file. The tax rate for estates is currently at 40%.