Items you will need
- IRS Form 1041
- IRS Form 1040
- Schedule B
- Schedule D
- Schedule K-1
- Schedule E
- Employer identification number
A trust is a legal fiction created to take ownership of assets for the benefit of a beneficiary or charitable cause. People use trusts for a variety of reasons, including avoiding estate taxes, shielding assets from the claims of creditors or for providing income to a charity, family member or other party. An irrevocable trust is a permanent trust that cannot be dissolved by the person setting up the trust, or grantor. Trust income is reported at two levels: First, the beneficiary must report income received from a trust. Second, the trust itself must report and pay income taxes on any income it receives and does not distribute to beneficiaries.
Obtain your copy of Internal Revenue Service (IRS) Form 1041 Schedule K-1 from the trustee. This is the form trustees send to beneficiaries at the conclusion of each tax year, reporting income or other taxable transfers the trust distributed to beneficiaries.
Download a copy of Schedule B of Form 1040. Complete the form using information from Form 1041 Schedule K-1. Report any interest or dividend income received from the trust on Schedule B. Report any capital gains on Schedule D. Finally, report other income or losses, reported to you on Schedule K-1, to the IRS using Schedule E.
Send in the forms, along with a copy of your Schedule K-1, to the IRS along with your individual income tax return.
Download a copy of IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, from the IRS web site. Search for the form by typing in Form 1041 in the search box in the upper right hand of the web page and click "search" to get the latest form.
Enter the name of the trust and the fiduciary in the appropriate blocks, as well as the trust employer identification number (EIN).
Complete the remainder of the form. You will list all income received by the trust, including interest income, ordinary dividends, qualified dividends, business income or loss (reportable on Schedule C), capital gains or losses, rents, royalties, partnerships, other estates and trusts, farm income and losses, and ordinary capital gains or losses.
Subtract any deductions from the amount calculated in the previous step. These may include taxes and fees paid, any charitable contributions, and interest paid.
Complete the back of the form, which includes worksheets to compute charitable deductions, the deduction for distributing income, and the trust's tax liability. Return the form to the address listed on page 7 of the Instructions for Form 1041 (see Resources).
There is no difference between reporting income on an irrevocable trust versus a revocable trust.
A Form 1041 must be filed with the IRS if the trust has $600 or more of gross income in a year.
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