Taxes Late, Confusion about K-1, 1041 forms. Please Help!

[LostInTaxes11]

Hi,
In October 2018 I had a trust of mine dissolved and am struggling to figure out what I need to report. I received a 2018 grantor trust tax information which I used to fill out a form K-1 that included the capital gains, dividends, etc. I think I have that part covered.
The part where I am most confused is about a refund I received for the 2018 required estimated tax in that amount paid to the IRS during 2018. In conjunction with this, I received a form 1041 that was blank save for a line 25a that cites "2018 estimated tax payments and amount applied from 2017 returns". I see it flows through to line 30 in the same amount. I am very confused as to what this refund stems from? And how do I record this for tax reasons? Would this refund be on my 2018 or 2019 tax forms?

Thank you so much in advance for your help!

 

[Taxing Matters]

The details of the trust matter. If it was a grantor trust up through the time the trust was dissolved the trust would not file Form 1041 and the related K-1s, nor should have any estimated tax payments been made by the trust to the trust's own EIN. That's because grantor trusts are effectively ignored under federal tax law and the income, deductions, and credits of the grantor trust are viewed for tax purposes as the income, deductions, and credits of the grantors directly.

Not having seen the forms you have and not having seen the trust document there really isn't much more I can tell you on this. You may want to see a tax attorney or other tax professional familiar with trust taxation for advice.

 

[LostInTaxes11]

Thank you so much for that information! I'm sorry I should have been more clear, this was a grantor trust. So when you say that income, deductions, etc are made by the grantors directly, does that mean that I don't need to report in on my personal taxes? And the same with the refund?

 

[davew9128]

No he didn't say anything of the sort. The question is why, when receiving a grantor statement, are you preparing a K-1?

 

[LostInTaxes11]

I guess I didn't realize the important distinction between a grantor and a non-grantor trust. I see now that a K-1 is irrelevant for a grantor trust. Since this is the case, how would the income, dividends, etc. be reported?

 

[Taxing Matters]

I guess I didn't realize the important distinction between a grantor and a non-grantor trust. I see now that a K-1 is irrelevant for a grantor trust. Since this is the case, how would the income, dividends, etc. be reported?

On the income tax return of the trust grantor(s) as though that income was paid to him/her/them directly instead of to the trust.

 

[LdiJ]

Thank you so much for that information! I'm sorry I should have been more clear, this was a grantor trust. So when you say that income, deductions, etc are made by the grantors directly, does that mean that I don't need to report in on my personal taxes? And the same with the refund?

You said that you dissolved the trust correct? Then you should do the same thing that you should have been doing all along. You report the income on your personal tax return if you are the grantor. The refund of the estimated tax payments shouldn't be "income" for tax purposes.

 

[LostInTaxes11]

You said that you dissolved the trust correct? Then you should do the same thing that you should have been doing all along. You report the income on your personal tax return if you are the grantor. The refund of the estimated tax payments shouldn't be "income" for tax purposes.

I'm sorry for my ignorance in that matter. Yes, the trust was dissolved in October 2018 because I had reached a certain age. So I am the beneficiary of the trust. Would the trust being dissolved thereby now make me the new grantor? Thank you.

 

[LdiJ]

I'm sorry for my ignorance in that matter. Yes, the trust was dissolved in October 2018 because I had reached a certain age. So I am the beneficiary of the trust. Would the trust being dissolved thereby now make me the new grantor? Thank you.

Then you are not the grantor. The grantor and the beneficiary are different people (usually). You really need to see a local tax professional because you don't know enough to properly explain it to someone over the internet. You need a face to face discussion with someone.

 

[LostInTaxes11]

Then you are not the grantor. The grantor and the beneficiary are different people (usually). You really need to see a local tax professional because you don't know enough to properly explain it to someone over the internet. You need a face to face discussion with someone.

Agreed, thank you!