Kea Posted March 21, 2012 Report Share Posted March 21, 2012 Married clients had a living trust with husband's SSN as the tax ID. I reported the trust's interest income on the clients' MFJ 1040. In 2010 the husband died. The 1099 INTs still showed name of trust and husband's SSN. Again I reported them on the MFJ return for 2010. Everything passed to wife. In 2011 the wife died. The1099 INTs still showed name of trust and husband's SSN. I am now filing a 1040 for the wife, but the husband's SSN is not / cannot be on her Single return. The beneficiary of the trust is the son (who is also my client). I know that the income received after the wife's DOD gets reported on the son's return & I am familiar with the process of nominee interest for IRD. So, in theory, I wouldn't need a 1041 - I could just move the income from Wife's 1040 to the Son's 1040. However, no EIN was ever established for the husband since everything passed directly to the wife. Can this be reported on a 1041 for a trust (as opposed to a decedent) and use the SSN for the tax ID? Or, do they now need an EIN for the trust (that no longer exists) or for the Dad's estate? Or, do I paper file the return for the wife with a letter explaining why we are reporting her 1099 INT income even though it isn't her SSN? Total of both 1099 INTs is $2500 with only $200 after wife's DOD. Thanks! Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 21, 2012 Report Share Posted March 21, 2012 Years ago it was unclear if a revokable living trust would require a ID number and some trusts incorrectly used the living persons SS#. It was later determined that for tax purposes the trust was ignored and no EIN number or reporting was needed until the person died. This couple evidently didn't get the word that on death they needed a EIN for income after date of death. In theory you should have reported on a 1041 on the husband and now on the wife. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 22, 2012 Author Report Share Posted March 22, 2012 Even if I can get an EIN for either of them, what do I now do about reporting the 1099 INT in the husband's SSN? If I "ignore the trust" then I also have to ignore that the son is the beneficiary of the accounts? Kick to 1041 and then K- to son? I can't go directly to son through IRD nominee? FWIW the original trust was set up in 2004 and as I understand it, the husband was quite insistent that there be no EIN. He wanted it in his SSN. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 22, 2012 Report Share Posted March 22, 2012 WHICH was correct at that time. only need ein when death Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 22, 2012 Report Share Posted March 22, 2012 Even if I can get an EIN for either of them, what do I now do about reporting the 1099 INT in the husband's SSN? If I "ignore the trust" then I also have to ignore that the son is the beneficiary of the accounts? Kick to 1041 and then K- to son? I can't go directly to son through IRD nominee? Anything you do is probably not right! What I would do is get a EIN for the trust and probably report the 1099 on a 1041 for the current year. Then get rid of the account or have the ID changed. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 22, 2012 Author Report Share Posted March 22, 2012 Assets of the trust have been distributed to the son and are no longer in the trust. Trust no longer exists. Can I still get an EIN after the fact? Even with that, the 1099s have already been issued in the deceased SSN. IRS matching computers will have a field day with this one! Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 22, 2012 Report Share Posted March 22, 2012 Assets of the trust have been distributed to the son and are no longer in the trust. Trust no longer exists. Can I still get an EIN after the fact? Even with that, the 1099s have already been issued in the deceased SSN. IRS matching computers will have a field day with this one! Yes. Remember, distribution of assets is not what is reported on form 1041 only income and expense. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 22, 2012 Author Report Share Posted March 22, 2012 Thanks so much for all your help OldJack. I hope to be as smart as you someday so I, too, can help out! I haven't done any trust 1041s before just a couple of ones for decedents. On one I know I kicked out a K-1 to the beneficiary. I guess that means that won't apply here. Thanks for the heads up. But if they paid a lawyer anything related to the trust in 2011 I guess I could put that on the 1041? Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 22, 2012 Report Share Posted March 22, 2012 I haven't done any trust 1041s before just a couple of ones for decedents. On one I know I kicked out a K-1 to the beneficiary. I guess that means that won't apply here. Thanks for the heads up. But if they paid a lawyer anything related to the trust in 2011 I guess I could put that on the 1041? You have to read the trust documents! Trusts usually have the option to pay any tax that is due on the 1041 or pass the net income on a k1 to the beneficiaries for them to add to their 1040 and pay taxes on the income. You don't do both. A distribution is taken into consideration on the 1041 if the trust is paying the tax. If the trust paid accountant and attorney fees it is deductible on page 1 of the trust 1041. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 22, 2012 Author Report Share Posted March 22, 2012 I got the documents yesterday, but that's on today's reading list (maybe tomorrow). So far, I've only scanned them. Didn't notice anything about tax treatment. Not sure they will address that since they are in the husband's SSN. And just to keep beating this poor dead horse. Once the Trust gets an EIN, I can report the interest on the 1041 without a problem even though the 1099s are issued in the SSN? Just attach for reference, maybe? Or a letter explaining what happened? I guess I'm learning something here. Just not sure I'll ever see this situation again to apply this new knowledge. Again thanks for helping me through this. Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 22, 2012 Report Share Posted March 22, 2012 Sure, attached to the 1041 a sch-B and after the name of the payer comment of Bank of XX, nominee "husband name" 1099INT and SS# or something like that. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 22, 2012 Author Report Share Posted March 22, 2012 Sounds good. This went from a simple return to a big problem & now back to something managable again - only slightly more complicated than I originally thought! Thanks! Quote Link to comment Share on other sites More sharing options...
Kea Posted March 27, 2012 Author Report Share Posted March 27, 2012 OK, I'm back to confused. I really thought this one was going to be fairly straightforward. I spoke to the person at the bank who has helped my client with all these account issues (yes, with signed written permission). Their "expert" said that since husband and wife were co-trustees they could keep using husband's SSN. I guess they didn't get the memo. Just to clarify - I need an EIN for the "trust" not for the "estate of John (or Jane) Doe" -- right? OR -- since everything is wrong now anyway -- could I show the nominee info on the wife's 1040 with the same phrasing OldJack used for bringing into the 1041? This would make my life easier -- which means I probably shouldn't do it this way! Thanks so much. Is it 4/17 yet? Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 27, 2012 Report Share Posted March 27, 2012 >>nominee info on the wife's 1040 with the same phrasing OldJack used<< Since this is a small amount of tax, that might be the simplest way even if it is incorrect. 1 Quote Link to comment Share on other sites More sharing options...
Kea Posted March 28, 2012 Author Report Share Posted March 28, 2012 Yay! I wasn't expecting that answer! Quote Link to comment Share on other sites More sharing options...
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