Due Date of Final 1041

[jasdlm]

I closed an estate in January of this year. I thought the final 1041 would be due 15 April of 2009. (There will be a 1099 from one company.) The CPA doing the 1041 indicated to me that the return is past due because the final 1041 (even though the estate is on a calendar year) is due 3 1/2 months after the closing of the estate. I feel like a complete idiot. I need to explain to my client that I screwed up, but I need to find the 'rule' first. The CPA faxed me something from the tax book, page 21-13, that says 'Trusts and estates terminate when the period actually required to perform the ordinary duties of administration ends. The administration cannot be unduly prolonged. An estate or trust is considered terminated for income tax purposes when all assets have been distributed except for a reasonable amount set aside in good faith to pay unascertained or contingent liabilities.' Does this somehow mean that the return is due in 3 1/2 months? How am I misinterpreting this? I actually have an executor's handbook for lawyers that gives an example of an estate terminating 31 March 2008 and the final return being due 15 April 2009, but I know lawyers are not the final say on tax matters.

Thanks so much.

[Bart]

I closed an estate in January of this year. I thought the final 1041 would be due 15 April of 2009. (There will be a 1099 from one company.) The CPA doing the 1041 indicated to me that the return is past due because the final 1041 (even though the estate is on a calendar year) is due 3 1/2 months after the closing of the estate. I feel like a complete idiot. I need to explain to my client that I screwed up, but I need to find the 'rule' first. The CPA faxed me something from the tax book, page 21-13, that says 'Trusts and estates terminate when the period actually required to perform the ordinary duties of administration ends. The administration cannot be unduly prolonged. An estate or trust is considered terminated for income tax purposes when all assets have been distributed except for a reasonable amount set aside in good faith to pay unascertained or contingent liabilities.' Does this somehow mean that the return is due in 3 1/2 months? How am I misinterpreting this? I actually have an executor's handbook for lawyers that gives an example of an estate terminating 31 March 2008 and the final return being due 15 April 2009, but I know lawyers are not the final say on tax matters.

Thanks so much.

From page 8 of the 1041 instructions:

When To File

For calendar year estates and trusts,

file Form 1041 and Schedule(s) K-1 on

or before April 15, 2008. For fiscal year

estates and trusts, file Form 1041 by

the 15th day of the 4th month following

the close of the tax year. For example,

an estate that has a tax year that ends

on April 30, 2008, must file Form 1041

by August 15, 2008. If the due date falls

on a Saturday, Sunday, or legal

holiday, file on the next business day.

[jasdlm]

Thanks for posting, Bart. The CPA is saying that in its final year, the estate fiscal year ends the day of the closing (even though it was previously a calendar year estate), and therefore the earlier (possibly) due date. Does this seem correct?

Thanks so much.

[joelgilb]

Thanks for posting, Bart. The CPA is saying that in its final year, the estate fiscal year ends the day of the closing (even though it was previously a calendar year estate), and therefore the earlier (possibly) due date. Does this seem correct?

Thanks so much.

My guess is you mean the probate was closed in Jan of 2008 and everything was disbursed. I am also guessing that you are not doing the 1041, but are possibly the attorney doing the probate. Is this correct?

Couple of thoughts:

1. If there is no taxable income in the Estate, it is not a big deal as there won't be penalties anyway and most if not all the income should flow to the heirs in 2008 and be reported on their 2008 1040, filed in 2009, even though the K-1's are for a Jan fiscal year. After all it is Jan 2008!, or

2. Tell the client you will do the return and use a Fiscal Year Ending date (other than 01/31/08) that still allows a timely filed return as IRS virtually never checks this.

[Randall]

Thanks for posting, Bart. The CPA is saying that in its final year, the estate fiscal year ends the day of the closing (even though it was previously a calendar year estate), and therefore the earlier (possibly) due date. Does this seem correct?

Thanks so much.

I don't have a cite, but I think you have a little leeway in determining the date. The final year can be a short year but even looking at the quoted material he gave you, you have a reasonable amount of time for wrapping up. Just list the beginning and ending dates for the final year on the return. Also, the final year ending in 2008 can be prepared using the 2007 forms, but you have to make sure it's according to any tax law updates for 2008. Ha. Fun, huh?

[jasdlm]

Thanks so much to both of you. Joel, you are correct, I am the attorney for the estate and not doing the 1041. I guess this is treated the same way as a short year in a business that terminates, etc? I guess you use previous year forms (as Randall noted) and hope the 1099s match?