Schedule K-1 (Form 1041) is a source document that is prepared by the fiduciary to an estate or trust as part of the filing of their tax return (Form 1041). After filing Form 1041, the fiduciary may provide a beneficiary a Schedule K-1 that reflects the beneficiary’s share of income, deductions, credits and other items that the beneficiary will need to report on their individual tax return (Form 1040). 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 (Form 1041), the beneficiary should first address those matters with the fiduciary that issued the Schedule K-1 and request an amended or corrected Schedule K-1. If the beneficiary is unable to reach an agreement with the fiduciary regarding any inconsistency, the beneficiary must file Form 8082 (which can be accessed in the tax program from the 1040 main menu by selecting Miscellaneous Forms).
Most of the items contained on a Schedule K-1 (Form 1041) are entered on a specifically designed K-1 Input Menu in the program. Amounts entered will then pull to the appropriate form, schedule or line of the taxpayer’s 1040. Some items may have to be entered on other entry menus based on the item and/or the election that the taxpayer makes on how to treat that income, deduction or credit item.
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 in the entry of a Schedule K-1 (Form 1041), review the Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filling Form 1040, and any instructional information that the estate or trust provided the beneficiary with the K-1.
To enter a K-1 (Form 1041) in Keystone Tax Solutions Pro from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (SCH E, K-1, 4835, 8582)
- K-1 Input – Select ‘New’ and double-click on Form 1041 K-1 Estate/Trust.
If the Form 1041 – U.S. Income Tax Return for Estates and Trusts was prepared in the Business Program of Keystone Tax Solutions Pro, the Schedule K-1 (Form 1041) can be pulled to the 1040 for the beneficiary. From the Main Menu of the beneficiary’s Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (SCH E, K-1, 4835, 8582)
- K-1 Input – Select ‘Pull’ and double-click on Business Package. The program will then pull the Schedule K-1 into the K-1 1041 Edit Screen for your review.
NOTE: This is a guide on entering Schedule K-1 (Form 1041) into the tax program. This is not intended as tax advice.
Additional Resources:
Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filling Form 1040
Schedule K-1 (Form 1041) – Heading Information
Schedule K-1 (Form 1041) – Income Items
Schedule K-1 (Form 1041) – Deductions, Credits & Other Items