It is that time of year again. Taxes! You have received (hopefully) tax forms such as W-2s and 1099s, what do you do now? As you compare the forms received this year with those received last year, you realize that you still have a form that is missing--the K-1. You cannot remember why you got a K-1 last year and now are wondering if you are going to get one this year and where it is. Or perhaps you have not ever received a K-1 before, but were told to expect one this tax year, and you are wondering about this new tax form. Please read on to learn about the what, why, and when of K-1s.
What is a K-1? A K-1 is a tax form issued by an Irrevocable Trust or an Estate.
Why do I get a K-1? You will receive a K-1 if you are a beneficiary of an Irrevocable Trust or an Estate.
When do I get a K-1? You will typically receive a K-1 after an Irrevocable Trust or Estate income tax return (Form 1041) has been prepared. The IRS filing deadline this year to file a Form 1041 is April 15, 2024 (with the possibility of a six-month extension). Therefore, you may not receive your K-1 in time to file your own personal income tax return by this year's deadline, which is also April 15, 2024.
What am I supposed to do with a K-1? If you received a K-1, you will need to include the information provided by the K-1 in your own personal income return. Therefore, if you are a beneficiary of an Irrevocable Trust or an Estate, and you are expecting to receive a K-1, but have not yet received it, you have two options: (1) file your 1040 as-is and then prepare an amended 1040 once you receive the K-1; or (2) file an extension for your 1040 return and file your income tax return once you received the K-1. There is a very slim chance that you could receive your K-1 in time for you to file your income tax return, but if not, filing an extension provides you with a safety net in case you are not able to meet the April 15, 2024, deadline.
Tips to make a stressful tax season less stressful:
If you are a beneficiary of an Irrevocable Trust or an Estate, please be patient. The Trustee of the Irrevocable Trust or the Personal Representative of the Estate may not know if you are going to receive a K-1. They may also not know when the K-1 will become available. Remember, the K-1 is generated when the income tax return for the Irrevocable Trust or Estate is completed.
If you received a distribution from an Irrevocable Trust or an Estate in 2023, you should expect to receive a K-1.
If you already received a K-1 (lucky you!) and have questions about it, please call your accountant.