Home › Services › Trusts & Estates › Trust Income Tax Return Preparation

Trust Income Tax Return Preparation

“Probably the most common mistake made when preparing Form 1041, U.S. Income Tax Return for Estates and Trusts, is not recognizing that taxable income and fiduciary accounting income are not the same.”

Trust income tax return preparation can be a quagmire for the unwary because of the unusual terms used in trust taxation, including terms such as distributable net income (DNI), corpus, beneficiary, income distribution deduction, simple trust, and complex trust. In addition, there are many types of trusts that require special attention because there are specific tax rules and regulations applicable to the type of trust. For example, a Qualified Subchapter S Trust, Qualified Revocable Trust, Charitable Remainder Trust, and Special Needs Trusts. Lastly, to correctly prepare a fiduciary tax return, the trustee has to understand the dispositive provisions of the trust to know if current income is taxed at the trust level or the beneficiary level. All this, and more, make trust taxation really complicated.  

Probably the most common mistake made when preparing Form 1041, U.S. Income Tax Return for Estates and Trusts, is not recognizing that taxable income and fiduciary accounting income are not the same. Our advice is to engage a CPA experienced with trust taxation to help you meet your tax filing requirements because preparing a fiduciary tax return can be very difficult and if not done properly may invite unwanted scrutiny from the beneficiaries.

Here is what you can expect when you engage us to prepare your trust income tax return . . .

  • We will read the trust document to gain an understanding of the accounting and income tax reporting requirements;
  • We will work with you to gather the necessary information to properly report income and allowable deductions, including the income distribution deduction, if any; and
  • We will help you understand fiduciary taxation so that you can feel confident in your dealings with your trust attorney and the trust’s beneficiaries.

For more information, please call us at (775) 828-5027 or send us an email.