Every domestic estate with gross income of $600 or more during a tax year must file a Form 1041. If one or more of the beneficiaries of the domestic estate are nonresident aliens, the personal representative must file Form 1041, even if the gross income of the estate is less than $600.
A fiduciary for a nonresident alien estate with U.S. source income, including any income that is effectively connected with the conduct of a trade or business in the United States, must file Form 1040NR, U.S. Nonresident Alien Income Tax Return, as the income tax return of the estate.
A nonresident alien who was a resident of Puerto Rico, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands for the entire tax year will, for this purpose, be treated as a resident alien of the United States.
The personal representative must file a separate Schedule K-1 (Form 1041), or an acceptable substitute (described below), for each beneficiary. File these schedules with Form 1041.
The personal representative must ask each beneficiary to provide a taxpayer identification number (TIN), which must be reported on the Schedule K-1 (Form 1041). A $50 penalty is charged for each failure to provide the identifying number of each beneficiary unless reasonable cause is established. A nonresident alien beneficiary with a withholding certificate generally must provide a TIN (see Publication 515). A TIN is not required for an executor or administrator of the estate unless that person is also a beneficiary.
The personal representative must also give a Schedule K-1 (Form 1041), or a substitute, to each beneficiary by the date on which the Form 1041 is filed. Failure to provide this payee statement can result in a penalty of $50 for each failure. This penalty also applies if information is omitted or incorrect information is included on the payee statement.
No prior approval is needed for a substitute Schedule K-1 (Form 1041) that is an exact copy of the official schedule or that follows the specifications in Publication 1167, General Rules and Specifications for Substitute Forms and Schedules. Prior approval is required for any other substitute Schedule K-1 (Form 1041).
Income of the estate is taxed to either the estate or the beneficiary, but not to both.
If a nonresident alien has an appointed agent in the United States, the personal representative is not responsible for filing Form 1040NR and paying any tax due. However, a copy of the document appointing the agent must be attached to the estate's Form 1041.
The personal representative also must file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, to report and transmit withheld tax on distributable net income (discussed later) actually distributed. This applies to the extent the distribution consists of an amount subject to withholding. For more information, see Publication 515.
If an amended Form 1041 must be filed, use a copy of the form for the appropriate year and check the Amended return box. Complete the entire return, correct the appropriate lines with the new information, and refigure the tax liability. On an attached sheet, explain the reason for the changes and identify the lines and amounts changed.
If the amended return results in a change to income, or a change in distribution of any income or other information provided to a beneficiary, an amended Schedule K-1 (Form 1041) must be filed with Form 1041 and a copy given to each beneficiary. Check the “Amended K-1” box at the top of Schedule K-1 (Form 1041).
Even though the personal representative may not have to file an income tax return for the estate, Form 1099-DIV, Form 1099-INT, or Form 1099-MISC may need to be filed if the estate received income as a nominee or middleman for another person. For more information on filing information returns, see the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G.
The personal representative will not have to file information returns for the estate if the estate is the owner of record, Form 1041 is filed for the estate (reporting the name, address, and identifying number of each actual owner), and a completed Schedule K-1 (Form 1041) is provided to each actual owner.
See the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G, for more information.
The personal representative does not have to include a copy of the decedent's will with Form 1041. If the will is later requested, attach a statement to it indicating the provisions that determine how much of the estate's income is taxable to the estate or to the beneficiaries. A statement signed by the personal representative under penalties of perjury that the will is a true and complete copy should also be attached.