How to handle Schedule K-1 (Form 1041) from deceased relative's estate

Thanks for the explanation, but I'm still confused about Box 14H. If it shows ($21,230) with parentheses, does that mean it's a negative number? And if so, what does that actually mean for my taxes? Also, would I need to file any other forms besides the 1040X to amend my return?

The parentheses in Box 14H do indicate a negative number, but in this context, it's not truly "negative." It's showing the distribution of assets from the estate to you. The negative sign indicates a reduction in the estate's assets (from the estate's perspective) because those assets were distributed to you. For your tax purposes, this information is primarily for tracking basis. When you eventually sell any inherited assets, you'll need to know your basis to calculate gain or loss. For an amendment, you'll need Form 1040X along with any schedules affected by the K-1 income, typically Schedule 1 for the additional income. If the K-1 shows any credits or other items, you might need additional schedules.

Does it actually explain what the negative amounts in parentheses mean? I've got something similar on my K-1 and none of the tax software I've tried seems to handle it right. Also, how accurate is it for state returns? I'm in California and they're super picky about estate income.

I'm skeptical about these tax services. I used something similar last year and still ended up having to call the IRS to sort things out. Do they guarantee their work is accurate or offer any kind of audit protection? Estate stuff can get complicated quick...

Yes, it specifically explains parentheses/negative amounts and what they mean for your specific situation. It showed me that the negative amount in my Box 14 was actually tracking information for future capital gains calculations and didn't affect my current year taxes at all. For state returns, it handled my New York return perfectly, showing which amounts carried over to state forms and which didn't. I believe they support all states, including California with their special rules. They're actually more thorough than most standard tax software for these uncommon forms.

How does this actually work? Do you have to give them your phone number or personal info? Seems a bit sketchy to have someone else calling the IRS for you.

There's no way this actually works. I've tried everything to get through to the IRS about my estate tax questions and nothing helps. They're literally impossible to reach. If this actually worked, everyone would be using it.

It doesn't call the IRS for you - it just holds your place in line. You enter the IRS number you're trying to call, and their system navigates the phone tree and waits on hold for you. When a real person is about to answer, you get an alert and it connects you directly to the IRS agent. You're the one actually talking to the IRS. No need to give them any personal tax info - just your phone number so they can call you when an agent is ready. I was skeptical too but it saved me hours of hold time. It's basically like having someone else wait in a physical line for you, then they text you when you're about to reach the front.

Thanks for bringing that up - I didn't even think about state taxes! I'm in Arizona, do you know if they handle estate income differently than the federal government? I assume I'd need to amend my state return as well but I'm not sure if all the same rules apply.

Arizona does require you to report K-1 income on your state return. The good news is that Arizona generally follows federal tax treatment for estate and trust distributions, so the numbers will flow similarly. You'll need to file Form 140X (Arizona's amended return form) along with your federal amendment. One thing to watch for: if any of the income in Box 11D is from Arizona municipal bonds, it's exempt from both federal AND state tax. But if it's from out-of-state municipal bonds, it's still exempt from federal tax but Arizona will tax it. The K-1 should have a statement attached that breaks this down.

I tried using TurboTax for my mother's estate K-1 last year. It does technically accept them, but I found it wasn't very helpful with explanations. It basically just asks you to input all the numbers from each box without much guidance on what they mean. If your K-1 is relatively simple (just a few entries), it might work fine. But mine had entries in about 8 different boxes, and I ended up hiring an accountant because I wasn't confident I was doing it right.

Thank you so much for this clear explanation! This is exactly what I needed to understand. Just to clarify - when you say the taxable income goes on Schedule 1 as "Other Income," do I need to write anything specific in the description field to identify it as estate income? Also, should I expect to receive a corrected or additional K-1 for the portion of the estate's fiscal year that falls into 2024 (October 2024 through September 2025), or is that something I need to follow up on with the estate executor?

@A Man D Mortal This is incredibly helpful! I m the original'poster and this clears up so much confusion. One follow-up question - since I need to amend my 2023 return, will this trigger any penalties or interest charges from the IRS? I filed my original return on time, but obviously didn t include the'K-1 income since I hadn t received it'yet. Also, do I need to make estimated tax payments for 2024 if I expect to receive another K-1 with similar amounts?

@A Man D Mortal Thank you for breaking this down so clearly! As someone who s been struggling'with a similar K-1 situation, this explanation finally makes sense. I have a quick question about the Box 14H basis tracking - if the estate distributed multiple types of assets like both cash (and property , would each)type be listed separately on the K-1, or would I need to get a separate statement from the executor to know the breakdown? I want to make sure I m tracking the'basis correctly for future tax purposes.

@A Man D Mortal As someone who just went through this exact situation with my grandmother s estate, I'want to add that you should also check if the estate issued any state-specific K-1 forms. In my case, the estate had assets in multiple states, and I received separate state K-1s that had different reporting requirements. Also, regarding estimated payments for 2024 - if you expect similar income amounts, it s probably wise'to make quarterly payments to avoid underpayment penalties. The safe harbor rule generally protects you if you pay 100% of last year s tax or'110% if (your AGI was over $150k , but with)this additional estate income, you might want to recalculate.

@A Man D Mortal Thank you for this comprehensive breakdown! I m dealing with'a similar estate K-1 situation and your explanation really helped clarify the timing and reporting requirements. I have a question about the amendment process - when filing Form 1040X, do I need to attach the actual K-1 form, or just reference the income amounts on the amendment? Also, if the estate is still open and distributing assets, should I expect to receive K-1s annually until it closes, or does it depend on whether there are actual distributions each year? I want to make sure I m prepared for'future tax seasons and don t get caught'off guard again.

@A Man D Mortal This is extremely helpful - thank you for the detailed breakdown! I m actually dealing'with a very similar situation with my aunt s estate. One'thing that s been confusing'me is the interaction between the estate s fiscal year'and my personal tax year. You mentioned that even though the estate s year runs'10/15/2023 to 9/30/2024, I need to report this on my 2023 return because that s the tax'year shown on the K-1. But what happens if the estate makes additional distributions to me in late 2024 say, in December (2024 - would those) show up on a separate K-1 for the estate s next fiscal'year, or would they be included in some kind of amended K-1? I m trying to'plan ahead since the executor mentioned there might be more distributions coming as they liquidate remaining assets. Also, should I be setting aside money for taxes on potential future distributions, or does it depend on the composition of what gets distributed?

@A Man D Mortal This is incredibly helpful! I ve been wrestling'with a K-1 from my father s estate for'weeks and your explanation finally makes it click. Quick question about the amendment process - when I file the 1040X, should I include a copy of the K-1 with the amended return, or does the IRS not need to see the actual form? Also, I noticed my K-1 has some entries in Box 12 Alternative Minimum Tax (items - do those) typically affect individual returns, or are they more relevant for corporate beneficiaries? I want to make sure I m not missing'anything when I prepare my amendment.

@A Man D Mortal This is exactly the kind of detailed explanation I ve been searching'for! I m dealing with'my first K-1 from my grandfather s estate and'was completely lost. Your breakdown of how the estate s fiscal year'works versus our personal tax year finally makes sense - I was so confused about why I needed to report 2023 income on a form I received in 2024. One quick question about the amendment timeline - you mentioned it can take several months for the IRS to process the 1040X. Is there any way to track the status of an amended return, or do I just have to wait? Also, if I owe additional tax from this K-1 income, do I need to pay it immediately when I file the amendment, or can I set up a payment plan? The extra $5,600 in taxable income is going to result in a decent tax bill that I wasn t expecting. Thanks'again for taking the time to explain this so clearly!

@A Man D Mortal Thank you for this incredibly detailed explanation! As someone new to estate taxes, this breakdown is exactly what I needed. I have a follow-up question about record keeping - you mentioned keeping all the documentation for basis purposes. Should I also keep records of any estate administration expenses or legal fees that might be shown elsewhere on the K-1? And if the estate continues to operate for several more years before final distribution, do these Box 14H basis amounts accumulate, or does each K-1 represent a separate basis calculation? I want to make sure I m tracking everything'correctly for when I eventually need to calculate capital gains down the road.

@A Man D Mortal Thank you for this incredibly thorough explanation! This is exactly what I needed as the original poster. Your breakdown finally makes sense of all the numbers on my K-1. Just to confirm my understanding: I need to file Form 1040X to amend my 2023 return, report the $5,610 difference $21,230 - $15,620 (as Other Income) on "Schedule 1," and keep the K-1 documentation for basis tracking on the $21,230 in distributed assets shown in Box 14H. One follow-up question - since I filed my original 2023 return on time in good faith before receiving the (K-1 , will the)IRS waive any penalties or interest on the additional tax owed? I ve heard there'might be exceptions for situations where you didn t have the'necessary tax documents by the filing deadline. Also, should I proactively contact the estate executor to ask about expected 2024 distributions so I can plan for estimated tax payments? I d rather not'get caught off guard again next year. Thanks again for taking the time to provide such a clear, professional explanation!

@A Man D Mortal Thank you so much for this detailed breakdown! As someone who s never dealt'with estate K-1s before, this explanation is incredibly helpful. I have a couple of follow-up questions about the practical aspects: 1. When filing the 1040X amendment, do I need to recalculate my entire tax return from scratch, or can I just add the additional $5,610 in income and let the IRS figure out the new tax amount? 2. You mentioned keeping documentation for basis tracking - should I be creating some kind of spreadsheet or formal record, or is just keeping the K-1 itself sufficient for future reference? 3. If the estate issues another K-1 for 2024 with similar amounts, would it be wise to start making estimated tax payments now to avoid underpayment penalties next year? I really appreciate you taking the time to explain this complex topic so clearly. It s saving me'from what would probably be an expensive trip to a CPA!

@A Man D Mortal This is incredibly helpful - thank you for breaking down such a complex topic! I m in a'similar situation with my late mother s estate and'was completely overwhelmed by the K-1 form. One question about the timing aspect: if the estate s fiscal year'runs from October to September, but I receive the K-1 in early 2025, does that mean I ll potentially need'to amend TWO tax years? It sounds like the 2023 K-1 I have covers income that should have been reported in 2023, but if the estate continues operating, I might get another K-1 covering 2024 income that I ll need to'report on my 2024 return? Also, regarding the Box 14H basis tracking - if the estate distributed a mix of cash and property, how do I determine which portion of that $21,230 represents each type of asset? Is there usually an accompanying statement that breaks this down? Thanks again for taking the time to explain this so clearly!