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What to Know about Form 1041

What to Know about Form 1041

What is tax Form 1041?

Form 1041 is the Internal Revenue Service’s tax return form that is filed by the fiduciary of an estate that receives income once a taxpayer dies. If an executor has been formally appointed for the estate, then the individual is regarded as the fiduciary and is required to submit Form 1041 to the IRS. Estate tax is calculated similar to how individual tax is tabulated on Form 1040; however, it is ultimately the beneficiary and not the estate that is held liable for the tax on any amounts distributed during the taxable year. 
How do I file the Form 1041?
Before filing the Form 1041, you must determine if the form must be submitted to the Internal Revenue Service. To check if the Form 1041 is compulsory, calculate the estate’s gross income for the taxable year. The Form 1041 must be filed if the estate’s gross income during the tax year was at least $600 or if any of the beneficiaries are non-resident aliens. Once you have affirmed the obligation, download Form 1041 and the instructions from the Internal Revenue Service’s website, located at www.irs.gov. 
Once you have obtained Form 1041, you must collect all financial records for the estate. These records will be useful when calculating your tax liability and should be retained in the event of an audit. Next, you must calculate the estate’s total income for the taxable year; this amount will include all income derived from interest, dividends, business profits, rents, royalties and any other income from any other source. Once the income has been affirmed, you must calculate the estate’s allowable deductions; these will include compensation to a fiduciary, all attorney’s fees, taxes paid, deductible charitable donations and various miscellaneous deductions present in the estate. When these numbers are accurately compiled, you must subtract the allowable deductions from total income to arrive at your adjusted total income. 
When the adjusted total income has been marked on the Form 1041, subtract your distributions to beneficiaries and the applicable estate tax deduction from the adjusted total income to arrive at the estate’s taxable income. Subtract from the total tax any amounts that have already been satisfied, such as withheld amounts or estimated tax payments, to arrive at the total tax due. When this is completed, sign and date the Form 1041 and include a check payable to the United States Treasury if any are owed. Mail the return to the IRS Service Center that accommodates your area.