As the fiduciary, file a 1041 Trust K-1 form when reporting income that a trust or estate generates, according to TurboTax. For each beneficiary, file form 1041 with the Internal Revenue Service detailing any credits or deductions made from an estate or trust, recommends Taxact. Upon filing schedule K-1, provide beneficiaries with copies of the schedule.Continue Reading
If beneficiaries receive guaranteed incomes from the estate, they must pay income taxes; if the incomes are discretionary, the estate is responsible. At the end of the year, file a schedule of the incomes allocated to each beneficiary, advises TurboTax. As of 2015, a trust that has a gross income of $600 of above in a tax year, has a nonresident beneficiary or generates a taxable income should file a K-1 form. As a reporting tool, the form reports the amounts that the trust or estate retains and the distributions made to beneficiaries in a tax year.
Distributions must occur for a trust to pay income taxes, meaning that capital gains remain with the trust unless the trust���s documentation requires their distribution to beneficiaries. The K-1 form lets a trustee deduct part of the income distributed to beneficiaries while filing a return, according to TurboTax.Learn more about Taxes