When do I need to file Form 1041 for an estate and what should be included on it?

You definitely need to file a Form 1041 (U.S. Income Tax Return for Estates and Trusts) for each tax year the estate remains open and has either gross income of $600 or more, or a beneficiary who is a nonresident alien. For your father's estate, you would need to file a 2024 Form 1041 since he passed away during that year, and then another 1041 for 2025 if the estate remains open. The 1041 follows the same filing deadline as individual returns - April 15th for calendar year estates. The 1041 will report income earned by the estate itself after your father's death (not his personal income before death). This includes interest earned on estate accounts, refunds received after death, and potentially capital gains from selling assets like the condo. You'll need to keep track of all income the estate receives and expenses paid. For the condo sale, you'll potentially have capital gains to report on the 1041, though there may be exclusions depending on circumstances. The basis in property acquired from a decedent is generally the fair market value at date of death.

Just wanted to share my experience - I recently went through this exact scenario with my mom's estate and found taxr.ai to be SUPER helpful. I was completely confused about what needed to be on the 1041 vs what didn't, especially when we sold her house. I uploaded all the documents I had (bank statements, property docs, etc) to https://taxr.ai and it analyzed everything and gave me a breakdown of what should actually be reported as income to the estate vs what were just transfers or returns of capital. It also flagged some deductions I had no idea I could take for estate administration expenses. Saved me a ton of time trying to figure out what goes where, especially with the home sale which had capital gains implications I wasn't considering. The tool basically organized everything I needed for the 1041 and explained why each item belonged (or didn't belong) on the return.

Just wanted to follow up - I tried taxr.ai after reading about it here and I'm really glad I did! I uploaded all the documents for my dad's estate (bank statements, the appraisal from when he died, and the sale documents from his house) and it organized everything perfectly for the 1041. The step-up in basis explanation was super clear - it showed that we didn't actually have much capital gain since the house only appreciated a little since his death. It also identified some executor fees and estate expenses that were deductible that I had no idea about. The system flagged a few insurance payments that came in after death that I wasn't sure how to handle. Turns out some were taxable and some weren't depending on the type of policy. Would have completely messed that up on my own! Definitely recommend if you're dealing with an estate tax return.

If you're having trouble getting answers from the IRS about filing the 1041, I highly recommend using Claimyr. I was stuck on hold for HOURS trying to get clarification about some estate income questions before I found them. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone tree for you and call you back when they have an actual human on the line. I used https://claimyr.com when I needed to get clarity on how to report the sale of my mother's home on the estate's 1041. The IRS website was confusing and the regular customer service line had a 2+ hour wait. With Claimyr, I got a call back with an actual IRS estate tax specialist on the line within about 40 minutes. They confirmed exactly how to handle the step-up in basis and which forms I needed to include with the 1041.

Ok I'll admit I was wrong about Claimyr. After seeing the responses here I gave it a try yesterday because I was desperate for answers about my mom's estate tax situation. It actually worked exactly as advertised - I got a call back in about 35 minutes with an IRS agent who specialized in estate issues. The agent walked me through exactly how to handle the 1041 for mom's estate, including some tricky questions about income that was earned before she died versus after. Turns out I was about to make a big mistake with how I was planning to report her final pension payment. I spent weeks trying to get answers through the normal IRS channels with no luck. Finally having a real conversation with someone who knew what they were talking about was worth every penny. Wish I'd known about this service months ago!

One thing to remember about the 1041: you need to decide on a fiscal year for the estate. Most people just use a calendar year (ending Dec 31) but estates can choose a fiscal year ending on the last day of any month as long as the first fiscal period doesn't exceed 12 months from date of death. Sometimes choosing a different fiscal year can provide tax advantages by distributing income to beneficiaries in potentially lower tax brackets. This is especially relevant if you're planning distributions from the estate.

Just a tip - don't forget that you can take deductions on the 1041 for expenses incurred in administering the estate. This includes executor fees, attorney fees, court costs, and even things like appraisal fees for the condo. The 1041 has some weird quirks compared to individual returns. You might want to use tax software specifically designed for fiduciary returns rather than H&R Block, which mostly focuses on individual returns. I used Lacerte for my brother's estate and it walked me through all the special schedules and deductions.

I'm dealing with a similar situation with my grandmother's estate and wanted to add a few things that might help. First, make sure you're keeping detailed records of EVERYTHING - even small expenses like certified mail fees or notary costs can add up and are deductible on the 1041. Also, regarding the condo sale - if your father lived in it as his primary residence for 2 of the last 5 years before his death, the estate might be able to claim up to $250,000 of capital gains exclusion on the sale. This is something a lot of people miss. You'll need to check the specific rules, but it could save significant taxes if the property appreciated substantially. One more thing - if you haven't already, consider opening a separate checking account specifically for estate expenses (different from the main estate account). This makes tracking deductible administration costs much easier when it comes time to prepare the 1041. I wish I had done this from the beginning instead of trying to sort through mixed transactions later.