How to select the right CPA to prepare 1041 trust and estate tax returns after death of mother or father or other family member

By Jeffrey Brooks, CPA, CFP, MBA for JBrooks Wealth Advisors, PC, a Professional CPA and CFP Firm jeff@jbrookswa.com 602-292-2009 Please consult with your professional tax CPA regarding your specific circumstances!

 

Most CPAs do not specialize in filing trusts and estate tax returns because their rules are totally different than filing a personal income tax returns.

 

Trust and estate tax law is very complex.

 

Recently Cindy (not real name of client) called my office after failing to find a qualified CPA.

 

The previous CPA preparer had passed on before Cindy received a letter from the IRS that the 1041 trust return had been prepared and filed incorrectly.

 

A trust is a separate legal entity. There are many kinds and types of trusts.

 

Cindy was 1 of 4 heirs to her mother’s estate. Her mother had passed away on April 26, 2013. Cindy’s father had passed away 5 years before Cindy’s mother passed away.

 

Cindy’s mother and father had set up a revocable living trust. For some reason they had used a different federal ID# for this revocable living trust instead of just using Cindy’s mother’s social security number.

 

For some reason the previous CPA prepared (now deceased) had prepared a 1041 return from April 26, 2013 to April 30,2014. The CPA had used a 2014 return when they should have used a 2013 return because the year began in 2013. Since all the assets were titled in the trust including their mom’s residence a calendar year should have been prepared.

 

The CPA had failed to read the living revocable trust’s (RLT for short) provisions resulting in selecting an estate trust instead of a Complex Trust.

 

On the 1st page of the Form 1041 there are choices of different types of trusts. Estate Trust, Simple Trust, Complex Trust.

A Complex trust means that the trust does not require that all of the income be distributed each year. A Simple trust requires ALL income to be distributed each year.

Selecting the wrong kind of trust changes the entire return.

The former CPA carried the capital losses directly to the beneficiaries K-1s when this is only allowed in the Final year of the trust.

 

Unfortunately the brokerage statements were not properly broken out.

 

The former CPA showed bequests as beneficiaries when the reading of the trust clearly reflected that they were not beneficiaries.

 

A Form 56 was not filed resulting in the failure of Cindy to get the refund from the IRS.

 

I found 27 other errors and we were able to help Cindy by amending the prior CPA’s prepared returns and resolve the IRS problem.

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com