Schedule K-1 (Form 1041) is a source document that is filed with the estate or trust tax return (Form 1041). After filing Form 1041, the fiduciary gives each beneficiary their Schedule K-1. The K-1 reflects the beneficiary's share of income, deductions, credits, and other items that the beneficiary will need to report on their individual tax return. Generally, these items will need to be treated in the same manner in which the estate or trust treated the items on Form 1041.
If the beneficiary does not agree with any of the items on the Schedule K-1, they should first address those matters with the fiduciary that issued the K-1 and request an amended or corrected K-1. If the beneficiary is unable to reach an agreement with the fiduciary regarding any inconsistency, the beneficiary must file Form 8082, accessible from within the individual tax return under the Miscellaneous Forms menu.
In TaxSlayer Pro, Schedule K-1 from an estate or trust is entered in a menu specifically designed for it. Most amounts will pull to the appropriate form or schedule in the tax return, while other amounts require the preparer to determine if and where they need to be reported.
The actual Schedule K-1 (Form 1041) consists of three parts:
Part I - Information about the Estate or Trust. This section contains the basic information about the estate or trust such as the Taxpayer Identification Number, the Name of the estate or trust, and the Fiduciary’s Name and Address.
If the estate or trust has filed a Final 1041 for that entity this tax year, it will be indicated in Item E of this section. This is relevant to the taxpayer since certain loss items can only be reported to the beneficiary in the final Schedule K-1 (Form 1041) and will be reflected in the final year deductions.
Also, contained in this section is whether the estate or trust filed Form 1041-T which only occurs when a trust or, for its final tax year, an estate may elect to have any part of its estimated tax payments (but not income tax withheld) treated as made by a beneficiary or beneficiaries.
Part II - Information about the Beneficiary. This section contains information about the beneficiary. Specifically, this section identifies whether the beneficiary is a domestic or foreign.
- Part III – Beneficiary’s Share of Current Year Income, Deductions, Credits, and Other Items. This section is used to report the beneficiary’s share of any of the estate or trust’s Income, Deductions, Credits, etc.
To assist you in entering the K-1 in the tax return, read the IRS instructions linked below as well as any additional information the corporation provided the taxpayer/shareholder with the K-1.
To enter Schedule K-1 (Form 1120-S) in the individual return TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - The next step depends on whether or not you also prepared the estate or trust return in TaxSlayer Pro:
- If you didn't prepare the estate or trust return in TaxSlayer Pro, select New, then double-click Form 1041 K-1.
- If you prepared the estate or trust return in TaxSlayer Pro, click the Pull button, then select Business Package. The program will pull in any K-1s for this taxpayer (and in a joint return, for the spouse).
Note: This is a guide on entering Schedule K-1 (Form 1041) into the tax program. This is not intended as tax advice.