Why Have A Tax Professional Handle Your Trust Tax Preparation Needs?
The popularity of tax preparation software has made it possible for the average person to his or her own taxes electronically and receive confirmation of receipt from the IRS in just hours. Even if you want to itemize your deductions, find that you need to amend a filing made during previous tax years, or apply for an extension, you can do all of this online, without the assistance of a tax professional. Even accountants and professional tax preparation services are using similar tools to file state and federal taxes for their clients, but trust tax return forms are tricky to fill out. One of them is the IRS 1041 form that applies to living, irrevocable, non-grantor trusts.
What Category Does Your Living Trust Fall Under?
Revocable trusts are a type of trust that is created to benefit a relative, but the person who established it retains the right to take out the funds and/or block access. Like the name suggests, a revocable trust isn't guaranteed, so the beneficiary is not guaranteed to have unrestricted access to funding. Also known as non-grantor trusts, the person who established it will continue to have control over fund disbursement. The kind of trust your family sets up will determine if you need to file a trust tax return as well as the specific forms that must be completed.
Family Trust Tax Forms And Taxation Rates
There may be benefits to establishing a revocable trust, such as retaining your position as trustee and ultimately being able to control how much money goes in out. At the same time, a trust tax return must be filed, and a much higher trust tax rate can also apply. If your living trust has earned interest or if additional funds have been added since the time that it was first established, you may be responsible for paying a higher amount in taxes.
On the contrary, those who have established irrevocable trusts don't need to submit any type of trust tax return forms. Certain declarations should be added to your personal tax return by a professional tax preparation professional, but there won't be any additional taxes due as a result of having a living trust. This could be a great benefit should you want give your loved ones access to money so that they can take care of themselves. No matter what, be certain that you understand the possible ramifications of establishing an irrevocable trust versus setting up a trust where you retain your authority as trustee.
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