What Is Form 1041 for a Decedent’s Estate?

When an individual passes away, their financial affairs continue in the form of an estate, which is a distinct legal and tax-paying entity. The estate holds the decedent’s assets until they are transferred to beneficiaries. During this administration period, assets may generate income, such as interest, dividends, or rent. This post-death income is not reported on the decedent’s final personal tax return but on Form 1041, the U.S. Income Tax Return for Estates and Trusts. The estate’s executor or administrator is responsible for filing this return.

Distinguishing the Estate Income Tax Return from the Estate Tax Return

A common point of confusion is the difference between the estate income tax and the federal estate tax. These are separate taxes reported on different forms. Form 1041 is for the estate’s income tax, which applies to earnings generated by the estate’s assets after the owner’s death. It functions as an annual income report for the estate as a temporary entity.

Conversely, Form 706, the United States Estate Tax Return, is for the federal estate tax. This tax is not on income but on the total net value of the decedent’s assets at the moment of death. Form 706 is only required for very large estates with gross assets exceeding a high threshold set by the IRS, which is $13.99 million for 2025. Because this exemption is so high, the vast majority of estates will not need to file Form 706.

Determining if an Estate Needs to File Form 1041

An estate must file Form 1041 if it accumulates $600 or more in gross income for the tax year. This includes all income from any source before any deductions are taken. Even if the estate has no taxable income after expenses, meeting the $600 gross income threshold mandates a filing. A return is also required regardless of income level if any beneficiary of the estate is a nonresident alien.

The executor can choose the estate’s tax year. They can opt for a calendar year ending on December 31 or a fiscal year, which is a 12-month period ending on the last day of any other month. For calendar-year estates, the return is due by April 15 of the following year. For fiscal-year estates, the deadline is the 15th day of the fourth month after the close of the tax year. When all assets have been distributed, the executor will file a “final” Form 1041 to close the estate for tax purposes.

Information and Documents Needed for Form 1041

To accurately prepare Form 1041, the executor must gather specific information and documents related to the estate’s financial activities.

Obtaining an Employer Identification Number (EIN)

An estate is a new legal entity and cannot use the decedent’s Social Security Number (SSN). The executor must obtain a unique Employer Identification Number (EIN) from the IRS. This nine-digit number identifies the estate for all tax matters, including opening a bank account and filing Form 1041. The fastest way to get an EIN is by applying online through the IRS website using the information on Form SS-4, Application for Employer Identification Number.

Gathering Income Information

The executor must identify and quantify all sources of income the estate generated after the date of death. The executor will need to collect all relevant tax-reporting documents, such as Forms 1099-INT, 1099-DIV, and 1099-B, issued to the estate’s EIN. Common sources of income include:

• Interest earned on the estate’s bank accounts
• Dividends paid on stocks held by the estate
• Capital gains from the sale of estate assets like real estate or securities
• Rental income from properties owned by the estate
• Payments the decedent was entitled to but had not received before death, known as Income in Respect of a Decedent (IRD)

Gathering Deduction Information

Estates can deduct certain expenses paid during administration, which lowers the overall tax liability. The executor must decide whether to deduct administrative expenses on the estate income tax return (Form 1041) or the federal estate tax return (Form 706), as they cannot be claimed on both. Allowable costs on Form 1041 include:

• Fees paid to the executor for their services
• Professional fees paid to attorneys, accountants, and appraisers
• Court costs
• The cost of a fiduciary bond, if required
• Certain administrative expenses necessary for the management of estate assets

Beneficiary Information

The executor must collect each beneficiary’s full legal name, current address, and Taxpayer Identification Number (TIN), which is usually their Social Security Number. This information is required to properly report any distributions made from the estate.

Calculating Taxable Income and Allocating to Beneficiaries

The calculation on Form 1041 determines the estate’s taxable income and allocates it between the estate and its beneficiaries. This process is governed by a concept known as Distributable Net Income (DNI). The calculation begins by totaling all of the estate’s income and then subtracting allowable deductions like executor and attorney fees. The result is the estate’s adjusted total income.

DNI, calculated on Schedule B of Form 1041, represents the estate’s income available for distribution. The DNI calculation serves as a limit for the income distribution deduction, which is the amount of income passed from the estate to the beneficiaries during the tax year. This deduction reduces the estate’s taxable income, shifting the tax liability for that income to the beneficiaries who received it. The estate is only taxed on income it retains.

To manage this pass-through of tax liability, the executor must prepare a Schedule K-1 for each beneficiary who receives an income distribution. Schedule K-1 is an informational form that details the specific amounts and types of income allocated to that beneficiary. The executor provides a copy of the Schedule K-1 to each beneficiary, who then uses that information to report their share of the estate’s income on their personal Form 1040 tax return.

The Filing and Tax Payment Process

The executor can file the completed Form 1041 with the IRS by mailing a paper copy or by using a tax professional or software that supports electronic filing. A copy of each beneficiary’s Schedule K-1 must be filed with the Form 1041 and also provided to the respective beneficiary by the filing deadline.

If the estate retained taxable income after all deductions, it will owe income tax. The estate is responsible for paying this tax from its own assets when the Form 1041 is filed. For estates that expect to owe $1,000 or more in tax for the year, quarterly estimated tax payments may be required. The executor can use Form 1041-ES, Estimated Income Tax for Estates and Trusts, to calculate and pay these installments.