Tax Return 2016: Getting to Know Your Tax Forms

Wondering what tax return you need to fill out this year? Cohen & Burnett can help. The IRS requires different tax forms for various purposes depending on your financial situation. Here is some background information on the federal tax returns we prepare at Cohen & Burnett:

1040 Personal Income Tax Return

Form 1040 is the primary tax return form, where you add up income, mark deductions, and calculate your actual tax bill. The 1040 ‘long form’ is only two pages long, but to fill the 70+ lines within it, you often must complete additional forms as well. There are a few relatives of the 1040 (the 1040EZ and the 1040A) for those with very simple tax situations.

1041 Estate or Trust Income Tax Return

Form 1041 is an entity tax return that applies to income generated by an estate or trust. If you are an executor for an estate, you could need to file 1041 for the estate if either one of these conditions is true: (1) the estate had gross income for the tax year of $600 or more, or (2) the estate had one or more beneficiaries who are nonresident aliens.

Estate income is considered to be any income that is earned by assets in the estate or that would have belonged to the deceased person. Typical examples of estate income include salary that wasn’t paid to the deceased person before death, rents from real estate in the estate, or interest on an estate bank account.

Every estate needs a taxpayer identification number (TIN), which can be secured easily through the IRS website. Also, be aware of the estate tax year, which is likely to be different than the calendar year.

Any trust and estate beneficiaries receiving income must, however, pay the income tax rather than the trust or estate. If you are required to distribute any income to beneficiaries, you may need to file Schedule K-1 in addition to Form 1041.

Form 1041 must also be filed for any domestic trust that has gross income of $600 or more for the year.

1065 Partnership Income Tax Return

Use form 1065 for businesses structured as a partnership. Unlike a corporation, a partnership does not pay tax. It instead passes net income, income tax credits, and other tax items through to the partners. Each partner receives a Schedule K-1 to report their share of items on their tax return. When you receive a Schedule K-1 form from your partnership tax return, you report those partnership tax items on Schedule E, Part II, of your 1040 individual tax return.

706 Estate Tax Return

Form 706, required for substantial estates, must be filed if the gross estate, at the time of the individual’s death, exceeds $5.45 million (in tax year 2016) or to pass any unused exclusion amount to the surviving spouse.

709 Gift Tax Return

This form is required if the deceased person made a taxable gift before death, but did not file a gift tax return.

Tax Preparation from Cohen & Burnett

For tax preparation assistance on any of the returns above, visit our homepage or contact us today. Cohen & Burnett has provided estate planning and administration, tax preparation services, and trustee and executor services in and around Washington, D.C. for over 25 years. We hope to hear from you soon!

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