What every tax pro should know before filing Form 1041

Preparing Form 1041 means more than reporting income; it requires accurate classification of estate income, such as dividends or rent, and clear separation from principal. Missteps can delay distributions or raise red flags with the IRS.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.    

Q: When do we need to file Form 1041, U.S. Income Tax Return for Estates and Trusts, and what extension do we use if a spouse passes away in February 2025?

A: If a spouse passes in February 2025, you’ll only need to file Form 1041 if the estate meets the $600 income threshold (or has a nonresident alien beneficiary). The first possible due date will be in 2026, depending on whether you choose a calendar or fiscal year. If more time is needed, file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to obtain a five-and-a-half-month extension.

Q: Who is responsible for the liabilities on the deceased's tax return after filing a final individual tax return (Form 1040)?

A: The estate is primarily responsible for the final Form 1040 tax liability, handled by the executor or personal representative. If a joint return was filed, the surviving spouse shares responsibility for the tax due. Executors can be personally liable if they distribute assets before paying the taxes owed.

Q: What if the taxpayer died in 2023 and you still do not have anything finalized from the lawyer in 2025? Form 1041 has not yet been filed.

A: The IRS does not wait for probate or legal proceedings. The final Form 1040 should have been filed by April 2024, and Form 1041 must be filed if the estate had $600 or more in income in any tax year since death. If nothing has been filed by 2025, you should get filings caught up as soon as possible to stop penalties and protect the executor (or spouse) from personal liability.

Q: If the decedent just left a will, do we need to file a 1041?

A: If the decedent left a will, but the estate did not have taxable income or a nonresident alien as a beneficiary or had less than $600 in gross income, you do not need to file Form 1041. The final Form 1040 may still be required, but the existence of a will alone does not trigger a 1041 filing requirement.

To learn more about Form 1041, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.