Tax Preparation Checklists To Help You Get Your Tax Documentation In Order

Schedule I ATM Tax Estates & Trusts Tax Preparation Checklist

General considerations that should be addressed prior to preparing your schedule I tax form for estate and trust accounts.

Tax Preparation Checklist for Preparing (FORM 1041) Estate and Trust Schedule (I) Alternative Minimum Tax (ATM)

Federal and state e-filing requirements for using
Forms 8453-F and 8879-F are specific to varying circumstances. Schedule I long form checklist

Is there any conflict of interest that exist between the trust and the trustor, trustee, or beneficiary? This can influence discretionary distributions of either principal or income, discretionary allocations of receipts or expenses, discretionary distributions of either principal or income to satisfy the legal obligation of a trustee.

General Schedule I Information and Documentation to be gathered.

  • Taxpayer Name and Number
  • Beneficiaries’ Names
  • Taxpayer addresses, tax identification numbers, and birth dates.
  • Prior year returns, work papers, correspondence
  • IRS and state tax audit info, and/or correspondence.
  • Carryovers and update schedules including tax audits effects
  • Copy of the will or trust agreement, Form 706, Form 709, or Form 8939, and date created (for generation skipping tax (GST) purposes)
  • Court filings for accounting and tax information
  • Proof of U.S. citizenship for fiduciary, grantor and beneficiaries

Professional Services Agreements and Determinations

  • Acquire signed engagement and privilege tax advice letter
  • Determine proper classification of trust (grantor, simple, complex, qualified disability trust, Qualified Subchapter S Trust (QSST), Electing Small Business Trust ESBT, pooled income fund, bankruptcy estate)


General Documentation and Determinations

  • Determine status of estate or trust for state filing requirements
  • Determine residencies of fiduciary and beneficiaries
  • Determine tax basis for all assets received
  • Do foreign financial accounts exist. FinCEN 114 (FBAR) must be filed
  • Determine changes in interests of beneficiaries during year
  • Review accounting methods
  • Consider filing Form 56 for initial and final return
  • Determine trust termination date
  • Determine if a foreign trust
  • Determine GST inclusion ratio and adequate support to verify ratio
  • Was there a change in fiduciary during year
  • Documentation to allocate first year return of estate income and deductions among trust, estate and/or final 1040
  • Consider filing power of attorney (Form 2848) if needed

Determinations and Documentation Preparation

  • Form 1040 Schedule H (if required)
  • Do disaster relief provision applies?
  • Is state e-filing required (note mandatory federal e-filing).
  • Document sources and amounts of income compared to prior year
  • Report all adjustments from changes in accounting period or method
  • Document sale or dispositions of property
  • Document related party sales & consequences. Like-kind exchanges (T.D. 9413 (July 9, 2008) and PLR 200912004 and CCA 200911006
  • 1099-B reporting covered transactions for basis, holding period and wash sale reporting on Form 8949.
  • Installment sales and Involuntary conversions
  • Document holding period and basis of assets sold.

Considerations and deductions to be addressed

  • Passive loss limitations and carryovers
  • K-1s for proper reporting of data
  • Consider election for gain/loss on distributed property
  • Compute accounting income under state law
  • Determine if capital gains are allocated to DNI
  • Is there discharge of indebtedness income
  • Determine proper allocations and limitations on interest expense for investments, trade/business, passive, tax-exempt income, etc.
  • Allocation for bundled fiduciary fees subject to the 2% AGI limitation
  • Allocate deductions for tax-exempt income
  • Allowable deductions (charitable, taxes, business, worthless securities, casualty losses, and attorney, accountant and fiduciary fees).
  • Consider limitations of at-risk, passive activity loss, or basis rules.
  • Allowable deductions for meals and entertainment
  • Is a estate tax deduction to income of a decedent available
  • Income distribution deduction and (AMT) influence.

Additional comments and considerations

  • Additional first-year (bonus) (SBJA 2010 and Rev. Proc. 2011-26)
  • Amortization of goodwill and other intangibles
  • Attach proper election (waiver of expenses) for 1041 item deductions
  • Determine depreciation and amortization allocated to beneficiary.
  • Capitalization of leased property
  • Compute state depreciation, if different.
  • Consider accumulation distributions don't apply to most domestic trusts
  • Consider 65-day distribution election for a complex trust or estate
  • Listed property (SBJA 2010) (Rev. Proc. 2011-21)
  • Like-kind exchange and involuntary conversion rules
  • Allocate to beneficiary if required
  • Methods and lives (SBJA 2010)

Schedule I Calculations and Credits

  • Allocate expenses including taxes
  • Compute taxes, net investment income (NIIT), Form 8960, and AMT
  • Consider income not subject to NIIT
  • Compute credit recapture
  • Confirm prior year overpayments, withheld taxes, and tax payments
  • Consider tax credits, including carryovers
  • Compute underpayment penalties
  • Compare taxable income and tax to prior year and projections
  • Deduct direct investment expenses on Form 8960
  • Determine if estimated tax should be 100% or 110% of prior year
  • Evaluate estimated tax payments/withholding
  • Prepare Schedule(s) K-1 and/or grantor letter(s)/statements.
  • Report tax shelters (Form 8886)

Schedule I Tax Preparation Considerations

  • Attach extension request(s), if required
  • Consider election to forgo net operating loss (NOL) carryback
  • Consider state tax credits for multistate filing
  • Consider third-party service provider notification
  • Consider Circular 230 requirements for written tax advice
  • Consider risk of accuracy-related penalty
  • Determine if required information returns have been filed
  • Determine final year excess deductions/losses for beneficiaries
  • File Form 1041-T for estimated tax payments allocated to beneficiaries
  • For generation-skipping distributions prepare Form 706-GS(T) or GS(D) and GS(D-1)
  • Review AICPA Schedule I Long Form For Additional Guidance