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What are the consequences of adding income from a trust directly on 1040, without filing a trust return? The trust has its own Fed ID.

laval650
Level 3

The trust is a brokerage account with dividends, interest and capital gains.

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itonewbie
Level 15

If it's a grantor trust, the grantor is also the trustee, and the payor has the grantor's W-9 on file to issue 1099 with his/her name and SSN, there should be no problem.  Otherwise, as the IRMN says, Uncle Sam will probably issue a notice as they'd be expecting a 1041 from the trust.

If these conditions are met except the brokerage does not have the grantor's W-9, you may like to suggest your client work with the brokerage to make the change to simplify the reporting going forward.

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2 Comments 2
itonewbie
Level 15

If it's a grantor trust, the grantor is also the trustee, and the payor has the grantor's W-9 on file to issue 1099 with his/her name and SSN, there should be no problem.  Otherwise, as the IRMN says, Uncle Sam will probably issue a notice as they'd be expecting a 1041 from the trust.

If these conditions are met except the brokerage does not have the grantor's W-9, you may like to suggest your client work with the brokerage to make the change to simplify the reporting going forward.

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Still an AllStar
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IRonMaN
Level 15

Getting a notice somewhere down the line from the IRS looking for failure to file penalties.


Slava Ukraini!
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