1041 estate and final 1040 needed for deceased?

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 preparing and filing 1041 trusts.

We normally only accept new clients that are referrals from existing clients or prospects that have used a CPA for at least two years.

However, we do accept prospects that have not used a CPA but need a CPA to prepare final personal tax returns and 1041 estate or trust returns.

Common errors include  failing to read carefully the living trust or will to understand how to correctly prepare the 1041 and state returns.

Another common error is failure to know when the a final 1041 estate or trust return should be filed.  I am proud that we were able to save clients our fees by being able to close in time to avoid having to file an additional return.

Because we prepare so many of these 1041 and state returns we have come up with the most common questions and information needed.

1041s are commonly audited by the IRS because a majority of CPAs do not know how to prepare.

Errors made by inexperienced 1041 preparer results in mistake causing children and other heirs being audited!

There are many choices of filing status.  Preparer’s frequently make errors resulting in the negative ramifications!

The final year requires the correct filing status.

Deductions are commonly taken in the wrong year.


Errors are commonly made in calculating fiduciary accounting income, DNI. And distribution deduction in form 1041 schedule B


Additional considerations:


  1. Errors in when capital gains are included in fiduciary accounting income and DNI.
  1. When distribution is listed on schedule B, line 9 and 910 and when is the distribution considered a gift and not included on the returns.
  1. If the 1041 trust is closed during a year do you have to wait till the next year when the new forms come out to file that final trust return?
  1. What is the difference between tier 1 and tier 2 beneficiaries?
  1. Are capital losses taken each year as they are incurred or are they only deductible in one of the years? Which year?
  1. How are utilities and other costs of maintaining the residence of the decedent. (Decedent is defined as the person who passed on. Commonly this is a father, mother, brother or sister, uncle, aunt. Or grandparents that has just passed on) treated as the incurred or in the final year?
  1. Where is the state refund or state tax paid by the trust recorded on the form 1041.?
  1. Can we make the choice to report all the income on the trust return forms 1041 and state return or do we have to report the income and deductions on each of the beneficiary personal returns?
  1. Why can’t it be a real benefit to record the incoming deductions through the fiduciary 1041 return and fiduciary state return?
  1. Do we have to wait to distribute funds out of the fiduciary checkbook or can we distribute before the trust is closed?
  1. What could go wrong if we distribute all the money in the fiduciary trust checkbook and how can we avoid this problem occurring?
  1. Why it is important to get a appraisal or real estate agent opinion letter to value the decedents residence?
  1. One of my brothers wants to take a piece of land instead of selling to an outsider. Do I need to show the sale of the land on schedule D as a disposition or just a distribution?
  1. My deceased mother had six beneficiaries. One of my brothers passed away. How do we distribute his portion?

18.. My sister doesn’t want to take her share of the estate. How can this be handled so she does not get charged with income tax or have to file a gift tax return?

  1. One of the beneficiaries is acting as the trustee for the estate. What needs to be done to deduct the trust fee and to prepare the correct reporting to the IRS?
  1. My family is keeping the estate and trust open until next year with about $5000. Does that mean we have to file another return in the following year because the bank Account still has money in it?
  1. Do I have to pay income tax on my distribution from the estate?
  1. The 1041 return is very confusing! Where do I report the legal fees paid? Do I show them as offset to income? Or do I show them as corpus? Or do I show them as partially income and partially corpus? Or do I show something as tax-exempt income or corpus?
  1. We have A trust and B. trust. Can we eventually combine both trusts into one trust?
  1. When do we have to file calendar year and when do we file fiscal year from the date of the decedents death?
  1. The estate trust has gross income of $10,000 but has only $300 of net income. I read that you don’t  have to file a 1041 if you have less than $600 of income. Does that mean that we don’t have to file a return?
  1. Decedent owed $7000 in federal tax and $5000 in state tax on final personal returns. Are these deductible and where do I post them on the 1041 and state tax returns?
  1. There many other mistakes that could occur that could result in IRS assessing taxable income and tax to the trust and the beneficiaries.

Jeffrey Brooks, CPA, CFP, MBA, for JBrooks Wealth Advisors

My team and I are here to help.

Please call 602-292-2009 and leave a message although my message says we are only working with new clients that have come from a referral or have worked with a CPA for at least 2 years.









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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