The fiduciaries for certain domestic decedent and bankruptcy estates and certain domestic trusts are required to file Form 1041.

The schedules listed below are associated with Form 1041.

The following list contains and defines common terms used with Form 1041 (See IRM 3.11.14.1. for more definitions.)

A single individual or group may set up several trusts. These trusts may have names or structures almost identical.

Mix-ups between these entities frequently occur since a single individual or firm usually administers both trusts. To resolve these cases:

Most trusts are required to file a calendar year return.

The only Form 1041 filers permitted to retain or adopt a fiscal year are:

To change the accounting period of an estate, a Form 1128, Application to Adopt, Change or Retain a Tax Year, must be filed and approved.

The bankruptcy estate of an individual in a Chapter 7 or Chapter 11 case may change its accounting period one time without approval.

An extension of time to file Form 1041 must be filed on or before the due date of the Form 1041. The extension of time to file a return does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, the total tax due must be paid when the extension request is filed.

Beginning January 1, 2006, IRS consolidated Forms 2758, 7004, 8736 and 8800. Form 7004, Application for Automatic 6-Month Extension of Time To File Certain Business Income Tax, Information, and Other Returns, is used to file for an extension on Form 1041, however, extension requests for Forms 1041, Form 1065, and Form 8804 are shortened from 6-months to 5-months beginning with extension requests that are due on or after January 1, 2009 (200809 and subsequent). The title of the form is now Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. See IRM 21.7.4.3.5, Form 7004, Revised December 2008 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for additional information.

Prior to January 1, 2006, the forms used to file for an extension of time to file on Form 1041 were:

The method of calculating the liability using Form 1041 varies depending on the type of taxpayer involved.

Decedent’s estates and trusts compute their income tax liability using the rates in the table below. The taxpayer enters the computed tax liability on line 1a of Schedule G. Follow the Schedule G submitted by the taxpayer as there can be other credits or taxes applicable. The total from line 7, Schedule G is the amount entered on the "Total tax" line (line 23 for 2009) on Form 1041.

If the decedent’s estate or trust used Schedule D and the alternative tax computation, follow the computation using the appropriate form line-by-line instructions. See the October 1, 2008 and prior revisions of IRM 21.7.4 for information in IRM 21.7.4.4.19 concerning the Election to Include in Gross Income, Gain on Assets Held on January 1, 2001.

If the bankruptcy estate must file a return, the trustee (or debtor-in-possession) completes the identification area at the top of the Form 1041 and lines 22 - 29 and signs and dates it. The trustee uses the Form 1041 as a transmittal for Form 1040, U.S. Individual Income Tax Return.

New and existing trusts and estates must make quarterly estimated tax payments in the same manner as individuals, except an estate and certain grantor trusts are exempt from making such payments during their first two taxable years.

There are exceptions for some entities from making estimated tax payments:

See the Disaster Assistance Information on SERP regarding the postponement of certain estimated tax payments of taxpayers affected by the hurricanes of 2004, and for the postponement of estimated tax payments in 2005, under the Hurricane Katrina/Rita Disaster Relief, for information regarding those hurricanes.

See prior revision of this IRM for more information on these postponements.

The due dates for estimated tax payments for calendar year filers are:

Generally, the estate or trust must make an estimated payment if it expects to owe at least $1,000 in tax (for tax periods beginning January 1, 1998 and subsequent). For tax periods beginning prior to January 1,1998, the threshold was $500.

Charitable trusts (Form 1041 with Fiduciary Code 9) and private foundations are subject to Corporate estimated tax provisions under IRC 6655.

Forms 1041-ES, Estimated Income Tax for Estates and Trusts, payment vouchers should be mailed along with payment to:

Internal Revenue Service
P.O. Box 804526
Cincinnati, OH 45280-4526

Other than paper, the only way to file Form 1041 electronically is via the Electronic Management System (EMS), discussed in more detail in paragraph 2 below. The former methods of filing: magnetic tape and diskettes are no longer available. Electronic filing of Form 1041 is voluntary.

Electronic Forms 1041 are filed using either of the following two methods: (ISDN dial-up is no longer available) via the Internet or by obtaining a dedicated leased line with an encrypted router located at the IRS Enterprise Computing Center in Memphis, Tennessee. The transmitter must pay the costs of both the dedicated leased line and the router. Both methods, i.e. Internet or dedicated leased line, use the IRS’s Electronic Management System (EMS)

Beginning November 1, 2005, IRS requires encryption of information transmitted via EMS. Therefore, transmissions of returns must be either over the internet using SSL for TELNET/S, or via Dedicated Leased Lines using FIPS - compliant method. If the filer wants to use dedicated lease lines, they must apply to do so and must provide their own equipment, i.e. a dedicated leased line or router. There have also been changes to the EMS Interface Menu and the State Retrieval Systems. Questions or problems related to these issues should be directed to the e-file help desk at 1-866-255-0654.

Electronic returns that have been accepted with errors are (errors/fallout) worked at the Ogden Submission Processing Center. For assistance, call e-Help Desk toll-free at 1-866-255-0654. Follow the prompts to reach the Help Desk at Ogden. Filers may also write to the IRS at the following address:

Questions or problems related to the following issues should be directed as follows:

In order to file Form 1041 electronically, filers, transmitters, and software developers (participants) MUST successfully pass Business Acceptance Testing System (BATS). The BATS process tests hypothetical scenarios to ensure the participants computer program has the correct file specifications to file returns electronically. Participant's are required to develop and submit their own test scenarios. Generally, BATS begins the first week of December and continues through the 15th of the following October. See Section 8 of Publication 1437, for more information on the testing process. See IRM 3.42.4.9, Receiving and Controlling e-file and MeF Test Transmissions, for more information.

The Form 1041 Electronic Filing System does not operate between October 22 through the following January 22 of any year. Effective January 23, 2010 through October 22, 2010, the IRS must begin to accept and process tax year 2009 Forms 1041. The Electronic Filing System accepts

Electronic returns are distinguishable by a unique Document Locator Number (DLN) and the words "Electronic Return -- Do Not Process" at the bottom of the return.

The file location code/tax class/document code for returns that were previously processed in Philadelphia are:

The location code/tax class/ document code for returns processed in Ogden are:

See IRM 3.42.4.4.1.1, e-file BMF Identification Codes, for more information on these codes.

Taxpayers may now apply to participate in all IRS e-file programs (electronically modem to modem) using one application, Form 8633, Application to Participate in the IRS e-file Program. This applies to Electronic Returns Originators (ERO), Transmitters, Software Developers and Intermediate Service Providers. Applicants must submit the application 60 days prior to participation . Business and individuals can apply to the program on-line @ http:/www.irs.gov/efile or by filing a paper Form 8633. Taxpayers are required to pass a suitability background check. For more information, see Publication 3112, The IRS e-file Application Package, and IRM 3.42.4.5, IRS e-file Application Information. Taxpayers may also call the e-Help Desk toll-free at 1-866-255-0654 for assistance. Taxpayers must mail the completed Form 8633 to the following address:

Electronic filing consists of two parts:

The current Form 1041 e-file program does not accept amended returns electronically. Taxpayers must complete an amended return on paper and file it at the campus where they would normally file a paper return.

Use CFOL command codes to research the account. Request the original return only when absolutely necessary. If it is necessary to secure the signature, use CC ESTAB and note "Provide Form 8453" in the remarks section.

Various Form 1041 adjustment requests are processed by Accounts Management. All prior adjustments to the account must be considered before making the requested adjustment.

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Action required on tax adjustments:

Action required on credit adjustments:

The Form 1041 CRNs are:

As a result of SSDERA, Form 942, Employer’s Quarterly Tax Return for Household Employees, became obsolete in 1995. It was replaced by Schedule H (Form 1040), Household Employment Taxes. (This form is referred to in this IRM as Schedule H.) Household employers must file Schedule H to report household wages and employment taxes paid after December 31, 1994.

SSDERA mandates Schedule H to be filed on a calendar year basis. Therefore, FY filers must attach a Schedule H for a calendar year.

The information contained in the following subsections of this section pertain to Schedules H processed on MFT 05. Besides trusts (a trust can be a domestic employer) with domestic employees, certain tax-exempt entities not required to file income tax returns may have domestic employees. These groups can file loose Schedules H rather than filing an income tax return and attaching Schedule H or including these domestic employees on their Form 941. Processing information can be found later in IRM 21.7.4.4.1.11.4.1.

For information on related subjects, see the subsections indicated below:

It is strongly recommended that only a small group of Tax Examiners work cases involving BMF Schedules H.

Employees cannot make adjustments to BMF Schedules H by phone. If the adjustment involves anything besides duplicate reporting of FUTA or reporting FUTA on the incorrect form (see IRM 21.7.3.4.16, Schedule H FUTA Erroneously Reported), prepare Form 4442/4442 DI/AMS and instruct the taxpayer to write to the campus where the Schedule H was filed. Apologize for not being able to make the adjustment by phone.

Form 1041-T is used by a trust, or for its final tax year, a decedent’s estate, which has made a Section 643(g) election to allocate the estimated tax payments made on Form 1041, among the beneficiaries.

The beneficiary who is treated as making the payment is deemed to receive a distribution on the last day of the taxable year of the estate or trust and is deemed to make a payment of estimated tax on January 15 following the taxable year.

The provisions in (2) above apply only to the extent the payments of estimated tax made by the trust for the taxable year exceed the tax shown as due on its return for the same taxable year.

Correspondex Letter 2305C was revised to answer mhttp://core.publish.no.irs.gov/instrs/pdf/11372y08.pdfost inquiries received on Form 1041-T. However, you may use another letter if it fits the situation better.

The Victims of Terrorism Tax Relief Act of 2001 (the act) was enacted on January 23, 2002. The act amends IRC section 692, by adding section 692(d) which provides that the IRS will forgive the federal income tax liability of those killed in the following attacks for certain tax years:

Section 692(d) also allows that the minimum amount of relief for victims of the specified attacks is $10,000. The $10,000 minimum forgiveness applies to the original or amended Form 1040, U. S. Individual Income Tax Return, and Form 1041, U. S. Income Tax Return for Estates and Trusts. See the October 1, 2002 through October 1, 2007 revisions of IRM 21.7.4 for more information on the Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness.

Government National Mortgage Association (GNMA) Trusts are each assigned a pool number which becomes the name of the trust with the first four digits of the pool number being the name control on the account. The fiduciary name is the owner of the GNMA. When an EIN is assigned to a GNMA pool number, it must remain with the pool number even when purchased by another fiduciary. ENMOD shows the pool number assigned to the GNMA at the beginning of the first name line. Therefore, when a GNMA account is sold, the EIN and pool number remain the same and only the fiduciary name changes.

GNMA Pool Returns are Non-Taxable Grantor Trust returns which should contain no taxable income.

When a GNMA trust is sold and bought during the year, each fiduciary files a short period return, which results in a duplicate filing condition (DUPF). Determine which fiduciary is selling and which one is purchasing to perfect the fiduciaries name and address on ENMOD to the purchasing fiduciary.

It is not necessary to process the short period return to the current period. Adjust the account accordingly. The seller should show in box F and G; the pool number, that it is a final return, and the date of sale. The buyer should show in box F and G; the pool number, that it is an initial return, and the date of purchase. If you cannot determine which fiduciary is selling and which one is buying from the available information, attempt to contact the taxpayer. If unable to secure the information, DO NOT change the care of/sort name line and the address currently on ENMOD.

If you receive a DUPF in which the pool number does not match the EIN: