{"id":38426,"date":"2022-02-15T22:00:00","date_gmt":"2022-02-16T06:00:00","guid":{"rendered":"https:\/\/ameriestate.com\/?p=38426"},"modified":"2022-03-09T23:54:35","modified_gmt":"2022-03-10T07:54:35","slug":"prepping-your-estate-for-tax-season%ef%bf%bc","status":"publish","type":"post","link":"https:\/\/ameriestate.com\/tax-planning\/prepping-your-estate-for-tax-season%ef%bf%bc\/","title":{"rendered":"Prepping Your Estate for Tax Season"},"content":{"rendered":"\n

With the 2021 tax season upon us, it\u2019s time to review all of your estate planning documents, especially your trusts. The IRS requires you to file Form 1041<\/a>, U.S. Income Tax Return for Estates and Trusts, for each trust that received $600 or more in income during 2021 or that has a nonresident alien as one of its beneficiaries. The only exception to this requirement is a grantor trust.<\/p>\n\n\n\n

Calculating the Tax Owed<\/h2>\n\n\n\n

The computations for determining the amount of tax a trust owes, if any, follow the same lines as those you use when calculating credits and deductions for your personal income tax amount. As a general rule, if you cannot take a credit or deduction for something, the trust likewise cannot take one for a similar item.<\/p>\n\n\n\n

Keep in mind that a trust must prepare a Schedule K-1 for all beneficiaries showing the amount of income distributed to them during the 2021 taxable year and therefore the trust credits and deductions attributable to them. Each beneficiary, in turn, attaches this schedule to his or her Form 1040 and pays the taxes thereon. The trust only pays income taxes on the amount of income not distributed to beneficiaries.<\/p>\n\n\n\n

Charitable Contributions<\/h2>\n\n\n\n

The handling of charitable contributions for tax purposes can become complicated. Whether the trust can deduct distributed funds depends on what type of trust it is. For instance, a simple trust cannot take a deduction for charitable contributions. Simple trusts share the following characteristics<\/a>:<\/p>\n\n\n\n