Need help with Form 1041 Estate Fiscal Year Accounting for inherited investments

You're in a common situation for estate filings that use a fiscal year. For the dividends received in 2023 (May-July), you have a few options: The cleanest approach is to contact your brokerage firm and request an interim breakdown of dividend classifications. Most major brokerages can provide this information upon request, though it might not be in the same format as a formal 1099-DIV. Ask specifically for a breakdown showing qualified vs. non-qualified dividends and tax-exempt interest portions. If the brokerage can't provide this, you can make a reasonable estimate based on the 2022 1099-DIV percentages. For example, if a particular security paid 80% qualified dividends in 2022, it's reasonable to apply that same percentage to the 2023 distributions from that security. Keep detailed documentation of your methodology in case of questions during an audit. The key with Form 1041 estate filings is consistency and documentation of your approach.

After dealing with my sister's estate last year, I found an amazing tool that saved me so much headache with these exact Form 1041 issues. I was struggling with dividend classifications mid-year just like you, and someone recommended https://taxr.ai to me. What I loved is that I just uploaded all the brokerage statements and it automatically identified and categorized all the dividend payments according to Form 1041 requirements. It even matched up previous 1099 information to estimate qualified vs non-qualified dividends for the partial year where I didn't have tax documents yet. It was especially helpful with the fiscal year calculations since the tool let me specify my custom date range for the estate's tax year. Truly made the whole process so much simpler.

I just have to share my experience after trying taxr.ai based on the recommendation here. It was exactly what I needed for my aunt's estate Form 1041 filing with a fiscal year ending mid-2023. I was completely stuck trying to figure out how to properly classify dividends from the portion of 2023 where I didn't have formal tax documents yet. The tool analyzed all the monthly statements and automatically categorized everything according to the proper 1041 classifications. It even explained its methodology for determining which dividends were qualified versus non-qualified. What impressed me most was how it handled the fiscal year accounting. I just set my custom fiscal year dates, and it properly allocated everything within that period. Saved me at least 10 hours of work and probably prevented several mistakes I would have made trying to figure this out on my own!

If you're having trouble getting dividend classification information from your brokerage, I'd recommend trying to get someone at the IRS on the phone. They can sometimes provide guidance for these estate fiscal year situations. But honestly, calling the IRS has been nearly impossible lately. I spent 3+ hours on hold multiple times trying to get help with my brother's estate Form 1041 issues. Eventually I found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - it basically holds your place in line and calls you when an agent is available. The IRS agent I spoke with explained exactly how to handle partial year dividend classification for estate fiscal year filings.

I need to eat my words and apologize to everyone here. After my skeptical comment about Claimyr, I decided to try it anyway because I was desperate for IRS guidance on my estate's 1041 fiscal year filing. To my complete shock, it actually worked exactly as described. I put in my number around 10am, went about my day, and then got a call connecting me to an IRS agent around 11:15am. I didn't have to sit through the horrible hold music or waste my entire morning. The IRS agent I spoke with was incredibly helpful with my fiscal year dividend classification question. She confirmed that for the months where I don't have a 1099-DIV, I should request an interim classification statement from my brokerage, but if that's not available, using the same percentage breakdown as the prior distributions is an acceptable method as long as I document my approach. This literally solved my biggest Form 1041 headache and saved me hours of frustration!

Another option to consider for your Form 1041 estate accounting issue: I've found that most brokerages maintain underlying classification data for dividends throughout the year, even before they generate the official 1099-DIV. If you log into your online brokerage account, look for a section called "Tax Center" or "Tax Information." Many platforms allow you to generate customized tax reports for date ranges that don't align with calendar years. I was able to get this for my father's estate with Fidelity, and I believe Schwab and Vanguard offer similar functionality. The key is that you need the classification between qualified dividends (which get preferential tax rates) and non-qualified dividends for accurate Form 1041 reporting.

An important thing to note with Form 1041 estate filings using a fiscal year: you need to make sure you're using the correct tax rates and forms. For a fiscal year that includes parts of 2022 and 2023, you would use the 2022 Form 1041 (not the 2023 version) since the fiscal year began in 2022. But you'll compute the tax using a blended rate based on the portion of income that falls in each calendar year.