My Mother died on December 18, 2009. Her 1040 was filed for 2009. In regard to the 1041, an EIN was obtained but there was no income earned or distributions made until 2010. Do I file a 1041 with zeros as the initial filing for 2009 then show the distributions and income on the 2010 1041 and mark that the final since all activity was in 2010?
Hi Sue. Look at the IRS letter or Form SS-4 (application for EIN) to determine if the estate requested a fiscal or calendar year.
Income received after death is taxable on Form 1041, not the final 1040, even if reported on a 1099 under your mother's social security number. Interest income, dividend income, and capital gain distributions from mutual funds are often credited at the end of the month. Investment income deposited after death is reported on Form 1041 not Form 1040. We usually report the income from 1099s on the final 1040 for matching purposes followed by a subtraction allocating the income to Form 1041.
You still have an opportunity to file a fiscal year return if it makes sense in your situation. The tax year specified on Form SS-4 or on an extension does not determine the taxable year. The first tax year is established by filing the initial Form 1041. For example, the fiscal year may begin on December 18 or after death as long as the year does not contain more than 12 months. You cannot change the year after you file your first Form 1041.
If you requested an EIN for a calendar year, make sure there is no significant income received (actual deposits or constructive receipt) between the date of death and year-end before filing Form 1041 for the short period ending 12/31/2009. You can file a zero return if there is no income or it is so insignificant that there is no tax effect.
If you use a calendar year, you had to file an extension last April or the return is late. It is not too late to use a fiscal year if necessary. If you use a fiscal year of November 30, the return is due March 15, 2011. There may be other reasons it is beneficial to select a fiscal year. I recommend you sit down with a local tax professional to review your options.
answered 19 Aug '10, 18:20
On the EIN issuance letter from IRS, did they notify you of when the return was due? I follow the rule for these letters to prevent any notification of non filing.
Even all zeros would be fine for 2009 and then if the estate was completely disposed of in 2010, mark that as final, yes.
I will defer however to peers on this site who deal with 1041's more often than I.
answered 19 Aug '10, 17:15