Tax filing requirements for irrevocable trust after parent's death - do I file for partial year?

Thanks for this info! So if the interest was actually like $800 for those months after her death, would I be in trouble for not filing? Also, does the $600 rule apply to the entire year or just the months after she passed?

If the trust earned $800 in income after your mother's passing, then yes, you would technically be required to file Form 1041 for 2023. The $600 threshold applies to the trust's income during its tax year, which in this case would start the day after your mother passed away and continue through December 31, 2023. I'd recommend contacting the tax preparer again with the specific amount of income earned and confirming whether a filing is needed. If you missed the filing deadline, you should file as soon as possible to minimize any potential penalties. The IRS generally looks more favorably on taxpayers who voluntarily correct mistakes.

Does it actually work with irrevocable trusts specifically? I've tried other tax tools and they always seem to get confused with trust income vs personal income.

I'm skeptical about tools like this. How does it handle complex situations like when there are multiple beneficiaries with different distribution schedules? My trust has income that gets split between immediate family and charities.

It definitely handles irrevocable trusts specifically - that's actually what I used it for. It distinguishes between trust income and personal income correctly, which was a huge help because I was mixing those up before. For multiple beneficiaries and different distribution schedules, it handles that too. You can input the beneficiary information and distribution requirements, and it calculates the correct allocations. It even helps determine which portions might be taxable to the trust versus passed through to beneficiaries. The charitable component is specifically addressed since those distributions often have different tax implications.

Wait how does this even work? Does the IRS actually talk to you if someone else waits on hold? Seems weird that this would be allowed.

This sounds like a scam honestly. The IRS barely talks to the actual taxpayer, why would they talk to some random third party service? And why would you trust some company with your sensitive tax info?

It's actually pretty straightforward. They use a call system that waits on hold for you, then when an IRS agent finally picks up, they call you and connect you directly to that agent. You're the one who talks to the IRS, not them - they just handle the hold time. They don't need your sensitive tax info at all. They're just getting you past the hold queue. Once you're connected with the IRS agent, it's just you and the agent talking directly. I was skeptical too until I tried it. The IRS has no idea you used a service to avoid the hold time - from their perspective, you just called and got through the queue like anyone else.

Do you have a specific system for tracking everything? My aunt left a trust with rental properties and I'm drowning in paperwork.

I actually keep it pretty simple but effective. I use a basic spreadsheet with separate tabs for income, expenses, and distributions. I record every transaction with the date, amount, source/recipient, and a brief description. For rental properties specifically, I have a separate tab for each property tracking rent payments, maintenance costs, property taxes, etc. This makes it easy to calculate net income for each property. I also scan all receipts and name the files with the date and vendor (like "2025-03-15_PlumbingRepair.pdf") so I can find them quickly if needed. Nothing fancy, but it's saved me countless hours at tax time and made trustee accounting reports super straightforward.

Yes, you'll need to handle this specific situation carefully. When the trust became taxable after your MIL's death, you should have obtained a new tax ID (EIN) for the trust. The income needs to be split between your MIL's final personal tax return (for income earned before her death) and the trust's Form 1041 (for income after death). You'll need to contact the financial institution to request corrected 1099s - one with your MIL's SSN for the pre-death period, and another with the trust's EIN for the post-death period. If they won't issue separate forms, you'll need to report the full amount on Schedule A of Form 1041 as income, then show an adjustment/allocation for the portion that belongs on the final individual return. This prevents the same income from being taxed twice.

This is really helpful information! I'm in a similar boat as the original poster - my grandmother passed away in October and left me as trustee of her irrevocable trust. I've been getting conflicting advice about whether I need to file for that short period at the end of 2023. One question - you mentioned getting a separate EIN for the trust. Is this something that needs to be done immediately after the grantor's death, or can it wait until you're ready to file? Also, did you run into any issues with banks or financial institutions when switching from the grantor's SSN to the trust's new EIN? I'm worried about disrupting the accounts while everything is still being sorted out. The penalty aspect is what's really stressing me out. Do you know what kind of penalties we're looking at if filing is required but missed?

You should get the EIN as soon as reasonably possible after the grantor's death, ideally within a few weeks. The IRS expects trusts to have their own tax identification number once they become taxable entities. You can apply online at the IRS website - it's actually pretty straightforward and you get the number immediately. Regarding financial institutions, most banks are familiar with this process and will help you transition the accounts from the grantor's SSN to the trust's EIN. You'll need to provide them with copies of the death certificate, trust documents, and the EIN confirmation letter. Some banks may temporarily freeze accounts during the transition, so it's worth calling ahead to understand their specific process. As for penalties, if Form 1041 is required but not filed, the penalty is typically $435 per month (or fraction thereof) that the return is late, with additional penalties for late payment of any taxes owed. However, if the trust owes no tax (common for trusts that distribute all income to beneficiaries), the penalty structure can be different. Still, it's not worth risking - better to file even if you're unsure, or get professional guidance quickly.

Thank you for sharing your experience - this is exactly the kind of real-world guidance I was hoping to find! The point about the $600 threshold applying only from the date of death forward is crucial and something I wasn't clear on before. I'm curious about the EIN application process you mentioned. When you applied online, did you need to have all the trust documentation ready, or just basic information? Also, did you run into any issues with the financial institution when switching from your father's SSN to the trust's new EIN for the accounts? One more question - when you filed Form 1041 for that partial year, did you need to make estimated tax payments for the following year, or does that depend on how much income the trust is expected to generate? I want to make sure I'm not missing any other requirements beyond just the initial filing.

For the EIN application, you'll need basic information about the trust - the trust name, your information as trustee, and the date the trust became liable for taxes (which would be the day after your father's death). You don't need to upload the full trust documents during the online application, but have them handy in case you need to reference specific details. Regarding the financial institution transition, most banks handle this routinely. I provided them with the death certificate, trust documents showing my authority as trustee, and the EIN confirmation. They updated the accounts within a few days. Some institutions may require you to open entirely new accounts under the trust's EIN rather than just updating existing ones, so check their policy first. For estimated tax payments, it depends on the trust's expected income for the current year. If you expect the trust to owe more than $1,000 in tax for 2024, you'll need to make quarterly estimated payments. However, many trusts distribute most or all income to beneficiaries, which can reduce or eliminate the trust's tax liability. The first year after becoming a taxable entity, you're generally not penalized for underpayment as long as you pay the full amount owed when you file the return.

This is incredibly helpful, thank you! I'm just starting to wrap my head around all the trustee responsibilities after my dad passed in December. The point about the trust's tax year beginning the day after death is something I definitely didn't understand before. Quick question - when you applied for the EIN online, did you run into any issues with the IRS system recognizing the trust as a valid entity? I'm worried about getting hung up on technical details during the application process. Also, did you end up owing any actual taxes on the trust income, or were you able to distribute everything to beneficiaries to avoid trust-level taxation? The specialized CPA recommendation makes a lot of sense. Regular tax preparers probably don't deal with these situations very often, so getting someone who really knows trust law seems worth the extra cost to avoid potential problems down the road.