How to File a Tax Return for Irrevocable Trusts

by Angela M. Wheeland Google

    According to the Internal Revenue Service, an irrevocable trust is a trust that cannot be amended, modified or revoked by the grantor, or the creator of the trust. When you file an income tax return for an irrevocable trust, you must treat the trust as a separate entity, requiring you to obtain an employer identification number, and file a return separate from your personal return. If you have not obtained an EIN, you must do so before filing the trust tax return. If the irrevocable trust has not generated income that exceeds $600 during the tax year, you are not required to file.

    Step 1

    Obtain Form 1041 and the corresponding instructions from the IRS website.

    Step 2

    Complete the top portion of Form 1041, providing the name of the trust, address, employer identification number and date the entity was created.

    Step 3

    Indicate the type of trust, which is generally a grantor, simple or complex trust, depending on the powers listed in the trust’s instrument. A simple trust is one that is not required to distribute income annually, is not a grantor trust and does not make charitable contributions or distribute the corpus. A grantor trust is any trust where the grantor retains the power to control the trust’s assets or income. A complex trust is any trust that is neither a simple nor a grantor trust.

    Step 4

    List all of the trust income in the “Income” section of Form 1041. Add the lines together and enter the total in the line labeled “Total Income.” Additional forms, such as Schedule C or Schedule D, might be required to complete the Income section.

    Step 5

    Enter any deductions in the “Deductions” section. Additional forms, such as Form 4952 and Schedule K-1, might be required to complete the Deductions section. If the trust made charitable contributions and is not a simple trust, you must also complete Schedule A, which is located on the second page of the form, to determine the charitable deduction. Schedule B, which is also located on the second page, is required to calculate the income distribution deduction.

    Step 6

    Add the total deductions and subtract this amount from the total income to determine the trust’s taxable income.

    Step 7

    Complete Schedule G, located on the second page of Form 1041, to determine the total tax owed on the trust. Subtract any tax payments or tax withholdings to determine the amount of the tax bill or refund.

    Step 8

    Sign and date Form 1041. Attach any supporting forms or schedules in the order listed in the form’s instructions. File your return electronically or mail your return to the address listed in the instructions.

    Tip

    • If one of the beneficiaries is a non-resident alien, you are required to file a tax return for the trust, regardless of whether or not the trust generated $600 in annual income.
    • The corpus of a trust is the property or money listed in the trust.
    • If the trust qualifies for the charitable deduction, you must also complete Form 1041-A, but certain exceptions apply. For more information, refer to the Form 1041 Instructions.

    About the Author

    Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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