1041 Fiduciary

These tax returns are prepared for estates and trusts. Estates have the potential of paying two types of taxes. One tax is based on the asset value of the estate (form 706) and the estate begins paying taxes when this value exceeds the”unified credit” of approximately $5.5 million. The other tax is based on income and expenses that either an estate or trust incurs (form 1041) while it is operating to accomplish its objectives, similar to an individual tax. The income side usually follows an individual’s tax return (interest, dividends, capital gains and other income). The expense side usually follows those expenses that a business would incur (accounting tax preparation, attorney fees, trustee or executor fees, taxes, interest, etc.).  These returns can create K-1’s that pass income or expenses to individuals.

The form 1041 usually costs more than an individual 1040 returns. The 1041 has rules which make them more difficult to prepare and correspondingly require more time to complete. Most regular preparer don’t do these types of returns but we have a couple of people experienced with this work. We also stay on top of changes by education and research so we can provide quality service.

In addition to the above, Baughans does bookkeeping and reporting for estates and trusts as required by the county Commissioner of Account. This is to prove to the Commissioner that the requirements specified by either the trust documents or a will have been carried out by the administrator, trustee or executor. These reports can be very simple or extremely complex dependent on the transactions that must be accomplished during the time period reported.


The gift tax return is an information tax return only. The giver prepares it to tell the IRS that the unified credit(see above) has been reduced because the giver has exceeded the $14,000 annual limit for gifts from one person to another. Neither the giver or the recipient pay any taxes with this filing. We recommend that this return be filed on a timely basis because just when you think you don’t need to do this you win the lottery and the late filing penalties and interest accumulate very quickly. If you feel this return is needed, see us and we can usually make recommendation.