An estate or trust required to file Form 1041 (United States Income Tax Return for Estates and Trusts) might pass certain items of income and deductions to its beneficiaries. So, if you’re a beneficiary, you must pay tax on your share of income and you can also claim credits and deductions on that income. This information is reported to the beneficiaries by a specific form. Read on to learn more.
What Do Form 1041 and Schedule K-1 Have in Common?
An estate or trust that generate incomes of $600 or more and estates with nonresident alien beneficiaries must file a Form 1041.
If beneficiaries receive the income established from a trust or estate, they must pay the income tax on it.
Income received from the trust or estate and deductions and credits are reported to beneficiaries on a Schedule K-1.
What is a Schedule K-1?
While we may have answered the question, “What is a schedule K-1?” but let’s elaborate further.
The estate or trust will send you a Schedule K-1 showing what you must report on your return.
The Schedule K-1 can include:
- Investment income, like interest, dividends, and capital gains
- Passive income, like rental income
- Deductions to reduce your taxable income
- Credits to reduce your tax
How you report the income depends upon the type of income you’re reporting.
Received a Schedule K-1 (via Form 1041)? Get Tax Help
If you need assistance when you’ve received a Schedule K-1 (Form 1041), we can help. You should make an appointment with one of our knowledgeable tax pros who can help you with an accurate tax return with every tax credit and deduction you deserve.
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