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Fiduciaries (1041)

1. Screen Screen or Form ADMN Tracking return preparation and banking data BILL Client Bill Adjustments and Payments COMP Compare current year tax return with two prior tax years ESUM Provides an e file summary of the return MISC Miscellaneous Screen Foreign Address The only thing on this screen is a Final Year Override field PREP Preparer Information Overrides 31 Form 1041 A Drake Software User s Manual Miscellaneous Codes for Tracking At the right side of screen 1 are two Misc code fields that can be used for tracking purposes For more information on using these miscellaneous codes see Customized Drop Lists in Chapter 3 Installation amp Setup of Drake Software User s Manual Tax Year 2013 Form 1041 A Form 1041 A U S Information Return Trust Accumulation of Charitable Amounts is used to report the charitable information required by section 6034 and the related regulations It must be filed by a trustee if the trust claims a charitable or other deduction under section 642 c unless an exception applies see IRS instructions for more information If the trustee must file Form 1041 A go to the 1041 A tab from which you can access screens for Parts I II II and IV of Form 1041 A You can also open screen 8868 for an extension application from this tab N OTE If filing an extension for Form 1041 A mark the Form 1041 A Type of Form 5227 return to be filed check box on screen 8868
2. Drake N Supplement Fiduciaries 041 Support DrakeSoftware com gt 828 524 8020 Drake Software User s Manual Tax Year 2013 Supplement Fiduciaries 1041 Support DrakeSoftware com 828 524 8020 Copyright Trademarks Drake Software User s Manual Supplement Fiduciary The 2013 Drake Software Manual Supplement Fiduciaries Drake Tax Software and any other related materials are copyrighted material All rights are reserved by Drake Enterprises LTD including all ownership rights This document associated software and related material are the property of Drake Enterprises LTD Drake Enterprises LTD hereby authorizes you to download display print and repro duce the material in this document in an unaltered form only for your personal non commercial use or for non commercial use within your organization Copyright trademark and other proprietary notices may not be removed O 2013 Drake Enterprises LTD All rights reserved While every attempt has been made to produce an accurate and complete manual there is no warranty expressed or implied to that effect Drake Enterprises LTD assumes no liability for damages or claims resulting from the use of the information contained herein The Drake Software Logo and Drake Tax are registered trademarks of Drake Enterprises LTD Other product names mentioned in this manual may be trademarks or registered trademarks of their respective companies
3. Form 5227 Split Interest Trust Information Return is used to report the financial activities of a split interest trust provide certain information regarding charitable deductions and distributions of or from a split interest trust and determine if the trust is treated for Chapter 42 excise tax purposes as a private foundation and subject to certain excise taxes under Chapter 42 Schedule A of the form is used to report accumulations of income for charitable remainder trusts distributions to non charitable beneficiaries and information about donors and assets contributed during the year Form 5227 must be paper filed To access screens for completing Form 5227 go to the 5227 tab of the Data Entry Menu You can open screen 8868 for an extension application from this tab also N OTE If filing an extension for Form 5227 mark the Form 5227 check box on screen 8868 Signing the Return Form 8879 F 32 A 1041 return must be signed by the fiduciary or authorized representative You can use Form 8879 F or Form 8453 F to provide a signature for an e filed return Form 8879 F IRS e file Signature Authorization for Form 1041 should be used if the preparer is a paid preparer whose information and PIN have been recorded in Setup gt Preparer s and if the fiduciary wants to use a Personal Identification Number PIN Tax Year 2013 Drake Software User s Manual Amending a Return to electronically sign the return This form also ser
4. Header Information Screen 1 contains fields for the general information printed in the top section of page 1 of Form 1041 Estate Trust and Fiduciary Information On screen 1 enter the name of the estate or trust and the name title and address of the fiduciary individual or business handling the estate or trust If the fiduciary has a mailing address in one state but does busi ness in another select the state in which the fiduciary does busi ness from the Resident state drop list If the fiduciary is a financial institution that submitted estimated tax N OTES payments for the trusts for which it is the trustee mark the check box in the Fiduciary information section For the purpose of this form a financial institution is one that maintains a Treasury Tax and Loan TT amp L account Attorneys and other individuals functioning in a fiduciary capacity should not mark this box For information on entering a name control see the field help for the Entity name control box Tax Year The software uses the calendar year as the default period for all fiduciary returns no date entries are required on screen 1 for a December 31 tax year end If the return uses a fiscal year where the year begins in the current year and ends in the next specify 6 Tax Year 2013 Drake Software User s Manual Header Information the beginning and ending dates in the Fiscal begin and Fiscal end fields on screen 1 N OTE The program adjusts calcul
5. Tax Year 2013 Drake Software User s Manual Supplement Fiduciaries Table of Contents What s New in Drake for Fiduciary Returns 00 0c eee e eee eee 1 New and Redesigned Screens 0 0 cee eee hs 1 New Functionality siii ceed Hinata biden ae RR eens dare eid saw fc t 4 Updating a Prior Year Return in Drake eese 5 About the F B Field aii aa AED AAA cae 6 Header Information css anos perras 6 Estate Trust and Fiduciary Information 0 0 0 0 06 ccc eet nett ene nes 6 ICA OL 6 Boxes A through Gr eese bo haps Anca pees gb Rte o t A haa ee eee es 7 A E aa EE E Burgo E ose a ENE 8 Interest and Dividends 5 eod nere Ree CP XR Gg E esa 8 Business Income or Loss Schedule C 0 0 eect teen teen nee 8 Capital Gains and Losses Schedule D 0 0 cece nnn nen enn enes 9 Rents Royalties etc Schedule E 0 0 0 une tei ennas EEE EAEE E AE EEE 10 Income from Pass Through Entities Schedule K 1 0 0 0 0 cece ene eens 10 Farm Income or Loss Schedule F 0 0 eee tet te nena 11 Gain or Loss From Sale of Assets Form 4797 llle 11 Other Income 5 42a ee beer a eaa eate a dede a data tae dead 11 Riiie corridas 11 Deduction Allocation 0 0 RR RR IR RR e e n eee nee n nes 12 Interest TD SAUCE GINS evi caesar Bese tem eh She evs alsa EEN foo e dor fons Rs arar Mos fond are io it fade 13 LAK OS IPIE 13 Fiduciary PES P 13 Charitable Deductions Schedule A 0 0
6. BSA forms must be completed online This includes the FBAR Report of Foreign Bank and Financial Accounts formerly known as Form TD F 90 22 1 In Drake screen FBAR or screen 9022 contains a link to the Financial Crimes Enforcement Network s BSA What s New in Drake for Fiduciary Returns Drake Software User s Manual e Filing System s website Allow yourself time to read and understand all the infor M PORTANT mation available on the BSA website and to register as a BSA e filer New Functionality Other changes made to the functionality of the Drake Software package include PDFs Binary or PDF files can now be attached to certain tax forms in the Fiduciary Attachments package All such documents are attached through use of the PDF Attachments screen accessible from the Electronic Filing section on the General tab of the Data Entry Menu For directions on attaching PDF documents see The PDF Attachment Process on page 26 Help is also available on the PDF Attachments screen and in item L of the FAQs located on the General tab Calculation Several new indicators of e file eligibility have been added to the enhanced Results Calculation Results window to tell you if a return has already been accepted if it is Window being suppressed by an option you chose if it is not e file eligible because you did not select it for e file or if a type of return is not available for e file The status of extensions will a
7. If you enter an amount greater than the overpayment on the Year s Tax return the amount applied will be set equal to the overpayment Click the blue Estimates link on line 29a or on the Other Forms tab to open the Estimated Tax Payments screen Other Information To complete the Other Information section on page 2 of Form 1041 use the Yes No check boxes and other fields provided on screen 5 The following sections provide additional information on completing this part of Form 1041 Tax Exempt Income If the estate or trust received tax exempt income the total is calculated from amounts entered on other screens for tax exempt income for instance on line 8 of INT screen or line 10 of the DIV screen The Yes column in the Other Information section of page 2 of Form 1041 is marked and the amount appears on line 1 as noted in Figure 9 on page 24 Tax Year 2013 23 Other Information WK_B2 Worksheet Drake Software User s Manual Other Information individual by reason of a contract assignment or similar arrangement 3 Atanytime during calendar year 2013 did the estate or trust have an interest in or a signature or other authority Aaa Figure 9 Notation on line 1 of the Other Information section that tax exempt interest and on dividends were received and shows the amount If the estate received tax exempt income not included in interest or dividends as reported on the INT and DIV s
8. We redesigned screen 1 Name Address General Info adding a section for Fiduciary Information separate from the section for the estate or trust information We ve also added F B Beneficiary or Fiduciary drop lists State ST drop lists and Passive Activity Number PAN boxes and foreign address fields to various other screens where appropriate One important change to note is that because of the MeF filing system preparers will receive their acknowledgments quicker than ever before Another big change is that now amended 1041 returns can be e filed Other changes and improvements include the following New and Redesigned Screens W2 Screens Tax Year 2013 We added new W2 W2G and 1099R screens to enter income and a new 8949 screen for reporting capital gains and losses from stocks bonds mutual funds and other investments The new Auto Expense Worksheet can be applied to Schedules C E and F Form 8611 Recapture of Low Income Housing Credit has also been added to the 1041 package Screens new to the 1041 package include the W2 W2G and 1099R screens available on the Income tab of the Data Entry Menu Links to these screens were added to screen 3 Income Deductions Payments see Figure 1 on page 2 What s New in Drake for Fiduciary Returns Drake Software User s Manual Income Deductions Payments i Income 1 irant onma 2a Onia TO A A S 2b X Qualified dividends 1 Beneficiaries 8 Other in
9. and expenses in addition to the estate s or trust s share of depreciation depletion and amortization generally depreciation and amortization are entered on screen 4562 and any interest paid or incurred on indebtedness allocable to a trade or business Net income or loss from a Schedule C is shown on line 3 Business income or loss of Form 1041 Screen C in the 1041 package is identical to screen C in the 1040 package with the exception of the F B drop list see About the F B Field on page 6 For more information on completing Schedule C and entering vehicle information see the Self Employment Income Schedule C section and the Auto Expenses section in Chapter 5 Return Preparation of the Drake Software User s Manual Tax Year 2013 Tax Year 2013 Drake Software User s Manual Income Capital Gains and Losses Schedule D Screen codes The amount on line 4 Capital gain or loss flows from entries on screens 8949 and 8949 D2 D2 both located under the Assets Sales tab in the 1041 package Form 1099 B Proceeds From Broker and Barter Exchange Transac N OTE tions reports individual transaction information and contains cost basis fields for brokers who are required to supply such information Enter 1099 B data on screen 8949 Form 8949 Screen 8949 has fields for Form 8949 Schedule D and Form 1099 B data Following Schedule D are some guidelines for data entry on this screen first for 1099 B in
10. remember the screen code or form number or on which tab of the Data Entry Menu the screen 1s located you can now search for the screen with keywords or phrases For details see Chapter 3 Basics of the Drake Software User s Manual Tax Year 2013 Drake s 2013 tax software supports electronic signature pads that allow taxpayers and tax preparers to digitally sign authorization forms and consent forms such as Form 8879 F IRS e file Signature Authorization for Form 1041 and Form PMT the ACH Payment authorization Go to our online store at http drake computimeonline com for details or to purchase a Drake recommended e pad For details see Chapter 6 Return Results of the Drake Software User Manual Tax Year 2013 We have highlighted more fields that require completion before a return is eligible for e file fields in blue in Figure 4 You can change the colors at Setup gt Colors and turn off the warnings at Setup gt Options gt Data Entry tab Estate or Trust General Information Name and address information Estate trust name In care of name Street address Suite Cip uU AA P a U S ONLY State ZIP Cou y A Foreign ONLY Province state Coun Entity name control eene gees ae E aoe lett gon as an t BA Ps i w we a Me M Figure 4 Required fields in blue Updating a Prior Year Return in Drake Tax Year 2013 If you prepared t
11. 3800 General Business Credit 19 Form 4136 Credit for Federal Tax Paid on Fuels 23 Form 4255 Recapture of Investment Credit 20 Form 4562 Depreciation and Amortization 29 35 Form 4684 Casualties and Thefts 29 Form 4797 Sales of Business Property 11 Form 4952 Investment Interest Expense Deduction 13 Form 4970 Tax on Accumulated Distribution of Trusts 31 Form 5227 Split Interest Trust Information Return 32 Form 5884 Work Opportunity Credit 29 Form 6198 At Risk Limitations 29 35 Form 6251 see Schedule I Form 6252 Installment Sale Income 29 Form 6478 Alcohol and Cellulosic Biofuels Credit 29 Form 6765 Credit for Increasing Research Activities 29 Form 6781 Gains and Losses From Section 1256 Con tracts and Straddles 29 Form 7004 Application for Automatic Extension of Time To File 22 Form 8082 Notice of Inconsistent Treatment or AAR 31 Form 8275 Disclosure Statement 31 Form 8453 F U S Estate or Trust Income Tax Declaration and Signature for Electronic Filing 33 Form 8582 Passive Activity Loss Limitations 31 35 Form 8582 CR Passive Activity Credit Limitations 19 29 Form 8586 Low Income Housing Credit 30 Form 8594 Asset Acquisition Statement Sec 1060 29 Form 8609 Low Income Housing Credit Allocation and Certification 30 Form 8611 Recapture of Low Income Housing Credit 20 Form 8801 Prior Year Minimum Tax 19 Form 8820 Orphan Drug Credit 30 Form 8821 Tax Inform
12. Preparers N OTE Code sheets are not displayed in View Print mode When the return is Tax Year 2013 printed the code sheets are printed after the Schedule K 1s 35 Making Changes on the Fly Items to Suppress Drake Software User s Manual Listed below are the options available from the PRNT screen for suppressing information from the generated return Proformas organizers Choose not to generate a proforma organizer for this client next year K 1 schedules and letters Choose to not generate these items with the return Grantor Trust Letter Choose not to generate this letter for a grantor trust State short form Choose to suppress the state short form State return will be generated on long form There is no global setting in Setup gt Options for any of these items Overriding Other Printing Options Printing of the following items can be either forced or suppressed from the PRNT screen to override the program defaults and global options selected in Setup Options Envelope cover sheet with taxpayer address Envelope cover sheet with IRS address Envelope cover sheet with state taxing authority address Envelope cover sheet with city taxing authority address Envelope cover sheet with K 1s Federal filing instructions State filing instructions Date shown on return default is current system date Due date to be printed on letters and filing instructions To have the program suppress the date from t
13. been covered elsewhere in this manual Listed Assets Sales Screens 28 Tax Year 2013 Drake Software User s Manual Other Screens Depreciation Credits Available Credit Screens Tax Year 2013 below are those that are available but are not covered in this document Table 2 Other Screens Available From Assets Sales Tab Screen Schedule or Form 4684 Form 4684 Casualties and Thefts 6198 Form 6198 At Risk Limitations 6252 Form 6252 Installment Sale Income 6781 Form 6781 Gains and Losses From Section 1256 Contracts and Straddles 8594 Form 8594 Asset Acquisition Statement Under Section 1060 8824 Form 8824 Like Kind Exchanges Get more information on these screens by clicking Screen Help by pressing F1 in the various fields of the screens or by reading about the equivalent screens in the Drake Software User s Manual Tax Year 2013 Use the Depreciation Detail 4562 screen to enter depreciable assets for Schedule C Schedule E or Schedule F For more information on depreciation and the 4562 screen Form 4562 Depreciation and Amortization in Drake see the Drake Software User 5 Manual Tax Year 2013 N OTE IRS rules do not allow section 179 depreciation in 1041 returns A number of credits when paid by the decedent s estate are allowed on Form 1041 even though they were not allowable on the decedent s final income tax return For more information see section 691 or IRD in Pub 559 Survivor
14. have certain investment income above certain threshold amounts Most of the fields on screen 8960 are override fields entries in the fields override system calculations If an obligation arising from the disposition of real property to which section 453A or section 453 1 applies is outstanding at the close of the year the estate or trust must include the interest due under section 453 1 or section 453A c in the amount to be entered on line 7 of Schedule G Form 1041 and attach a statement showing the computation From line 7 of the Schedule G section of screen 4 click the Required STM link to open the SCH Unformatted Statement screen Figure 8 If you have entered other statements an Existing Forms list is opened Double click the New Record line to open a new statement window From the Type of attachment statement number and title drop list select O11 1041 Sch G Ln 7 deferred tax In the large text box show your computations for the amount you entered on line 7 of screen 4 SCH Unformatted Attachment to Return FIB F imi Type of attachment statement number and title 011 1041 Sch G Ln 7 Deferred Ta zl Multi form code This computation was made in the following manner p N rr bt till t t ni apt gi m oh aide amna eai stant Mena aan Figure 8 From the SCH screen select 011 from the drop list and show your computation in the text box For more information see the IRS instruction
15. help for the K1 screen go to NOTES FAQ item M Help for Schedule K 1 For information on entering income from a pass through entity as reported on a Schedule K 1 see Income from Pass Through Enti ties Schedule K 1 on page 10 Part I of the Schedule K 1 Information About the Estate or Trust is completed automatically based on the information entered on screen 1 of Drake See Estate Trust and Fiduciary Information on page 6 The following beneficiary information must be entered directly on screen K1 ID number An EIN or other drop list is included to indicate if the ID number is an EIN or if this K 1 is for a Form 1042S Foreign Person s U S Source Income Subject to Withholding Form 1042S does not require an ID number e Name and Address Separate fields are provided for street address city state and ZIP code As with most Drake addresses an entry in the ZIP code field auto matically fills in the city and state fields To use the foreign address fields enter data in the Address and City fields click in the Province State field then enter the name of the foreign province or state as appropriate Select the appropriate foreign country from the drop list and then enter the postal code if appropriate Resident State Select the resident state from the drop list if needed e Percentages Use the Fed and State fields to indicate the percentage of income deductions or credits tha
16. of the U S indicate which account by marking one of the check boxes at the bottom of the PMT screen For more information on JATs and handling foreign accounts in the program see the Screen Help for the PMT screen If the following IRS error reject code is generated when you e filing a 1041 return you must contact the IRS for further information The e file help desk number is 866 255 0654 e Reject Code 122 The EIN Name Control Mismatch reject code 122 is by far the most common e filing error code for 1041 returns according to the IRS Drake has made improvements to its 1041 program to prevent returns from being rejected under this code See the field help for the Entity name control box on screen 1 for details Tax Year 2013 Drake Software User s Manual Supplement Fiduciary Index A accountant fees 14 24 accrual method of accounting 35 address change of 7 allocation of deductions to income 12 24 of estimated payments to beneficiaries 22 alternative electronic signatures 33 minimum tax AMT 18 35 amending a 1041 return 7 33 a Schedule K 1 16 34 attorney fees 14 24 B bankruptcy 9 bankruptcy estate 7 beneficiary applying a screen to a 6 direct entry of information for 15 distributions to noncharitable 32 estimated tax payments allocated to 16 22 flow of depreciation to 16 foreign 15 billing 31 C capital gains and losses carryovers from prior years 10 cash method of accountin
17. templates e Introduction to Letters in Drake in Chapter 2 Installation amp Setup e The Letter Keywords section of Appendix C Keywords For an amended return the K 1 letter automatically refers to the amended K 1 To edit the letter for an amended K 1 from the Home N OTE window of Drake go to Setup gt Letters Click Open gt Fiduciary gt Fiduciary K1 Amended Follow the steps outlined in Introduction to Letters in Drake in Chapter 2 of the Drake Software User s Manual Tax Year 2013 to make changes in the letter New for 2013 The K1G screen was added to create statements that allow you to explain any entry on Schedule K 1 From the K1 Line and Code drop list of the K1G screen select the line and code number for that line that you wish to include an explanation for From the ID and Name drop list select a K 1 recipient Only those beneficiaries for whom you have created a K1 screen appear in the drop list In the General Explanation text box include your explanation Press PAGE DOWN to add another explanation A statement is created for each K 1 line explained for the beneficiary selected from the ID and Name drop list N OTE Omit an entry from the ID and Name field to include the statement for all K 1 recipients Estate Tax Deduction Tax Year 2013 If the estate or trust includes income in respect to a decedent IRD in its gross income and such amount was included in the decedent s gross est
18. that is IRD In Respect of Decedent e Any part ofa total distribution shown on a Form 1099 R that is treated as ordinary income W2 W2G New for 2013 Links to screens W2 W2G and 1099R were added to screen 3 so the and 1099R preparer can enter W 2 income income from gambling and income from pensions Screens annuities retirement IRAs etc For details on completing these screens see Personal Service Income and Gambling Income and Loss in Chapter 5 of Drake Software User s Manual Tax Year 2013 Deductions Lines 10 through 21 of Form 1041 comprise the Deductions section of the form Tax Year 2013 11 Deductions Drake Software User s Manual Many of the amounts for this section can be directly entered using screen 3 though some amounts are calculated from data entry on other screens in the program Deduction Allocation Deductions can be directed to one of the income types listed on screen 3 On the right side of screen 3 item 1 in Figure 6 are four override fields under the heading Portion of first column not allocable to tax exempt Amounts entered in these fields are not allocated to tax exempt income Income Deductions Payments Income 1 Interest income 2a Ordinary dividend income 2b Qualified dividends 1 Beneficiaries 8 Otherincome W 2 w 2G Deductions 11 Fas 42 Fidudavless 14 Attorney accountant and return preparer fees 15a 15b 15c
19. use the credit s screen For example use the 8820 screen for Form 8820 Orphan Drug Credit e GBC and ESBC carryforwards and carrybacks Data entry for the General Business Credit is the same in the 1041 package as in the 1040 package For more information on completing screens 3800 and GBC see the Drake Software User 5 Manual Tax Year 2013 Details are also available in the Drake Software User s Manual Supplement Corporations 1120 N OTE An amount on Form 3800 General Business Credit may prevent the return from being eligible for e file The Passive Activity Credit Carryover PACR screen streamlines data entry and increases the number of passive credit carryforward amounts that can be updated each year It is to be used for returns requiring passive activity credit calculations for Forms 8582 CR Passive Activity Credit Limitations and 3800 General Business Credit For more on the PACR screen and related worksheets produced see Passive Activity Credits in Chapter 5 Return Preparation of the Drake Software User s Manual Tax Year 2013 Credit for prior year minimum tax flows from Form 8801 Prior Year Minimum Tax to line 2c of Schedule G In Drake you can fill out prior year minimum tax information on screen 8801 The 8801 screen is accessible from the Credits tab Bond credit flows from screen 8912 to line 2d of Schedule G In Drake you can fill out bond credit information on screen 8912 The 8912 screen is acces
20. viii Drake Software User s Manual Supplement Fiduciary recapture 20 returns see returns withheld 22 year fiscal vs calendar 6 termination date 7 third party designee 37 transmitters 33 transmittal form for paper documents 33 trust information for state purposes 35 type of entity indicating 7 U updating a prior year return 5 W WK_B2 worksheet Allocation of Deductions to Tax Ex empt Income 24 Tax Year 2013
21. 30 Form 8912 Credit to Holders of Tax Credit Bonds 30 Form 8941 Small Employer Health Insurance Credit 30 Form 8948 Explanation For Not Filing Electronically 31 Form 8960 2 Form 90 22 01 24 G grantor cover letter 36 information overrides 35 type trusts 7 H header information 6 household employment taxes 20 importing Schedule D data 9 income 8 11 distribution treated as ordinary 11 tax withheld 22 tax exempt 23 indicating a fiduciary or beneficiary 6 initial return 7 interest and dividend income 8 deductions 13 split Form 5227 32 tax exempt 14 IRD in respect of a decedent 11 17 K K 1 cover letters 17 36 Tax Year 2013 Index L letters K 1 cover 16 36 lump sum distributions 18 methods of accounting 35 N name and address of beneficiary 15 of estate or trust 6 or address change 7 name control 6 38 Net Investment Income Tax 2 next year depreciation listing 35 nonexempt charitable trust 7 O organizers suppressing 36 overpayments 21 23 overriding estimate amounts 21 firm preparer or ERO information 36 grantor or fiduciary information 35 preparer information 32 program calculations for Sch K 1 15 program defaults 35 37 Schedule E calculations 10 P passive activity credits 19 paying a balance due electronically 37 PDF 27 percentage received by beneficiary 15 PIN electronic signatures 29 32 preparer information overriding 32 36 preventing certain info
22. 7 92F ic 09d bie sat M 33 Or 8453 E 24 ei O uela waned ase oes gabe da UR REN c a ACER dire TR 33 Amending a RelUihisererrctheea e E REOR RR a eRbFRGdq EF encased Cie ER P E 33 Filing an EXDSIDE trar bss a eee dea 34 State specific Information lll 34 Making Changes on the Fly lt odssdccetasncede cates sa dade onere erorar na 35 Suppressor Force Printing cc a we ree Lae VER Ae Vae XU Ree d Regie X dew eee sare 35 Overriding Other Printing Options 0 cee hh en 36 Listing a Different Firm Preparer or ERO ona Return sssseseeeeee eee 36 o 65 544 oie creed sa qEESEGTPRRRPEERRACGSSUSPREEATRERRFERREEAS 37 Electronic Funds Withdrawal Direct Debit o oooooooooooorco eh 37 j APPO O v iv Tax Year 2013 Fiduciary Returns 1041 The basics of data entry on a fiduciary 1041 return are the same as for the 1040 Field and screen level help shortcut keys and navigation throughout data entry all function as they do in the 1040 See the Drake Software User s Manual Tax Year 2013 for the basics of using the program What s New in Drake for Fiduciary Returns Because the IRS converted 1041 from the Legacy to the MeF filing system there have been a lot of changes made to the Fiduciary package Many of the changes are cosmetic and you might not notice them but many were made to simplify data entry For instance we standardized the 1041 screens to more closely resemble those in the other packages
23. Drake Software User s Manual Elections 2013 pco1 Name s as shown on return Y our Social Security Num ber Freds Fiduciar 10 4110411 The trust made this election because detention atl A RR RN septies asso dip gt citt mM naan A to Figure 11 The election explanation appears as an Election statement N OTE Making these elections and completing these statements does not change the calculation of the return The PDF Attachment Process Binary or PDF files can now be attached to certain tax forms in the Fiduciary package All such documents are attached through use of the PDF Attachments screen accessible from the Electronic Filing section on the General tab of the Data Entry Menu Three main steps are involved in the PDF attachment process in Drake 1 Creating a PDF document to be attached 2 Informing the program that a PDF document will be sent with the return 3 Attaching the PDF document for e filing These steps are described in the following sections Creating a To create a PDF file PDF File 1 Scan the document to be attached to the return TI P Its a good idea to use the DDM scanning feature for this step 2 Save the document to your client s DDM file your computer s desktop or any where you can readily find it Many types of documents for instance documents created in Microsoft N OTE Word can be printed or saved as PDF documents if you have a PDF printer such as Adobe Reader
24. Exempt Interest Income Office in Home K1G Screen Ponzi Losses Contact Information Bank Secrecy Act Tax Year 2013 entered expenses on lines 12 or 14 of screen 3 Income Deductions Payments and all or a portion ofthese expenses were administrative expenses those administrative expenses should be entered on the new AGI screen accessible from the Other Forms tab of the Data Entry Menu The calculation allows for a deduction for administrative costs to the extent that these costs were incurred in the administration of the estate or trust that would not have been incurred if the property were not held by the estate or trust If an amount is entered in the override field of the AGI screen there is no need to enter the administrative costs The override amount will be used where all AGI amounts are required For more information see Screen Help on the AGI screen or the IRS instructions The Auto Expense Worksheet AUTO screen available from the Income tab of the Data Entry Menu has been added to the 1041 package As in the 1040 package the AUTO screen can be applied to Schedules C E and F through use the For drop list Use a separate AUTO screen for each vehicle through use of the multi form code MFC box A WK_AUTO worksheet is generated for each AUTO screen created Because tax exempt interest income is required in box 10 of Form 1099 DIV there is now a line 10 on the DIV Dividend Income screen At the bott
25. K 1 schedules Enter data on one of these screens only if transcribing from a com pleted Schedule E For Schedule K 1 information see Schedule K 1 on page 15 The E screens in the 1041 package are similar to those in the 1040 package For more information on completing these screens see the Drake Software User s Manual Tax Year 2013 Income from Pass Through Entities Schedule K 1 10 If the estate or trust received a Schedule K 1 from a pass through entity the corresponding lines on Form 1041 should be used to report the interest dividends capital gains etc from the pass through entity In Drake use the following screens to report income from a pass through entity e Screen K1P For a Schedule K 1 issued by a partnership e Screen K1F For a Schedule K 1 issued by another fiduciary estate or trust e Screen K1S For a Schedule K 1 issued by an S corporation Tax Year 2013 Drake Software User s Manual Deductions When the return is generated the amounts from pass through entities flow to the cor responding lines on Form 1041 Specifically where the amounts flow depends on the type of entity In most cases the amounts flow to page 2 of Schedule E but in certain cases the amounts flow to Form 4797 Form 3800 or page 1 of Schedule E For information on completing Schedule K 1 Form 1041 used to report N OTE a beneficiary s share of income deductions and credits from either the trust or the deceden
26. Tax and Payments 24a 24b 1041 T date filed Tax paid with extension Federal income tax withheld 24d 24e 26 29a 1 Interest 2 Dividends 5 Other Portfolio Income 109R 10 Interest Do not include amount from Form 4952 Amount of tax from line 11 that is also deductible on resident state return Other deductions NOT subjectto the 296 floor Net operating loss deduction for losses from other years Allowable miscellaneous deductions subject to the 296 floor IN Ense EN dodo RR 2013 estimated tax payments and amount applied from 2012 He Do NOT duplicate estimated tax payments on the ES screen Estimated tax payments allocated to beneficiaries Penalty for underpayment of estimated taxes es Amount of overpayment to be applied to 2014 estimate Apply deductions against non capital gain income first 2 Override amounts of deductions allocated to income type when distributing on K1 6 Ordinary Business Income 7 Net Rental Real Estate Interest Income Dividend Income 2 Estate Trust Portion of first column not allocable to tax exempt Estate Tax Deduction T 7004 Form 7004 7 Mark if any is from Form 1099 l Form 2210 Estimates 3 Short Term Cap Gain 4 Long Term Cap Gain Figure 6 Screen 3 Amounts not al
27. all Bank Secrecy Act BSA forms must be completed online This includes the FBAR Report of Foreign Bank and Financial Accounts formerly known as Form TD F 90 22 1 In Drake screen FBAR or screen 9022 contains a link to the Financial Crimes Enforcement Network s BSA e Filing System s website Allow yourself time to read and understand all the infor M PORTANT mation available on the BSA website and to register as a BSA e filer Tax Year 2013 Drake Software User s Manual Elections Seller Provided Financing If the estate or trust is claiming an interest deduction for qualified residence interest paid on seller provided financing the IRS requires an attachment with the name address and taxpayer ID of the seller To enter this information click the Paid link on line 5 to open the Qualified Residence Interest Paid on Seller financed Mortgage screen This screen accepts information for up to three sellers Entering information on this screen generates a indicator in the Yes column on line 5 in the Other Information section on page 2 of Form 1041 and generates a statement containing information on the sellers Ifthe estate or trust received seller financed mortgage interest click the INT link from screen 5 line 5 or open the INT screen from the Income tab of the Data Entry Menu and enter the payer s information in the If seller financed mortgage interest section To enter information on an installment sale clic
28. and Capital Asset Reporting in Chapter 5 of the Drake Software User Manual for more information On screen D2 also accessible from the Assets Sales tab has fields in the lower section for use when no Form 8949 is required Line 1a of this section is for totals for short term transactions on Form 1099 B for which basis was reported to the IRS and for which you have no adjustments Line 8a is for long term transactions on Form 1099 B for which basis was reported to the IRS and for which you have no adjustments Net This new tax goes into effect in 2013 The 3 8 percent Net Investment Income Tax Investment applies to individuals estates and trusts that have certain investment income above Income Tax certain threshold amounts In general investment income includes but is not limited to interest dividends capital gains rental and royalty income non qualified annuities income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer The threshold for trusts and estates is 11 950 Report this tax on Form 8960 Net Investment Income Tax Individuals Estates and Trusts The 8960 screen in Drake is located on the Other Forms tab of the Data Entry Menu AGI Screen We have updated how we calculate adjusted gross income AGI If a preparer has 2 Tax Year 2013 Drake Software User s Manual What s New in Drake for Fiduciary Returns Auto Expenses Tax
29. ate for estate tax purposes the estate or trust is allowed to deduct in the same tax year that portion of the estate tax imposed on the decedent s estate that is attributable to the inclusion of the IRD in the decedent s estate Use the Estate Tax Deduction screen accessible through the link on line 19 of screen 17 Tax and Payments Exemption Drake Software User s Manual 3 to enter data for this line Amounts entered on the Estate Tax Deduction screen generate worksheet WK_ESTTX with calculations flowing to line 19 Estate tax deduction including certain generation skipping taxes of Form 1041 and box 10 Estate Tax Deduction of the Schedules K 1 For details see the field helps and Screen Help on the Estate Tax Deduction screen The amount on line 20 Exemption is an automatic entry determined by the type of entity filing the return e Trusts that must distribute all income are allowed a 300 exemption Other types of trusts receive a 100 exemption e Estates receive a 600 exemption e Estates and trusts filing their final returns marked Final return in section F of screen 1 in Drake receive no exemption Tax and Payments For the Tax and Payments section of the Form 1041 the totals come from information entered on screen 3 and elsewhere in the program Tax Computation Schedule G Lump Sum Distributions 18 Alt Min Tax Credits The Total Tax amount on Form 1041 flo
30. ation Authorization 31 Form 8822 Change of Address 31 Form 8824 Like Kind Exchanges 29 Form 8826 Disabled Access Credit 30 Form 8829 Expenses for Business Use of Your Home 31 Form 8834 Qualified Plug in Electric and Electric Vehicle Credit 30 Form 8835 Renewable Electricity Refined Coal amp Indian Coal Production Credit 30 Form 8844 Empowerment Zone and Renewal Community Employment Credit 30 Form 8845 Indian Employment Credit 30 Form 8846 Credit for Employer Social Security and Medi care Taxes Paid on Certain Employee Tips 30 Form 8855 Election to Treat a Qualified Revocable Trust as Part of an Estate 31 Form 8864 Biodiesel amp Renewable Diesel Fuels Credit 30 Tax Year 2013 Drake Software User s Manual Supplement Fiduciary Form 8874 New Markets Credit 30 Form 8879 F IRS e file Signature Authorization for Form 1041 33 Form 8881 Credit for Small Employer Pension Plan Start up Costs 30 Form 8882 Credit for Employer Provided Child Care Fa cilities and Services 30 Form 8886 Reportable Transaction Disclosure Stmt 31 Form 8896 Low Sulfur Diesel Fuel Production Credit 30 Form 8903 Domestic Production Activities Deduction 31 Form 8907 Nonconventional Source Fuel Credit 30 Form 8908 Energy Efficient Home Credit 30 Form 8909 Energy Efficient Appliance Credit 30 Form 8910 Alternative Motor Vehicle Credit 30 Form 8911 Alternative Fuel Vehicle Refueling Property Credit
31. ations for depreciation gains and losses on sales of assets based on the tax year used Boxes A through G Types of Entities About Grantor Type Trusts Tax Year 2013 Enter most information for boxes A through G top of Form 1041 on screen 1 Note that boxes B Number of Schedules K 1 attached and C Employer identification number are completed automatically based on information entered elsewhere in the program Other boxes are Box A Type of entity Box D Date entity created e Box E Check boxes for nonexempt charitable and split interest trusts e Box F Check boxes to indicate if a return is an initial a final or amended return and to indicate name change for the trust or an address or name change for the fiduciary e Box G Check box to indicate if a section 645 election was made and a field to enter EIN of the trust If the estate or trust was closed or terminated during the year enter N OTE the date of closure or termination in the Date closed terminated field in the lower right section of screen 1 Indicate the type of entity in section A of screen 1 If the return is for a decedent s estate mark the Decedent s estate check box and required enter the decedent s SSN and date of death For a trust mark the type of trust For a bankrupt estate select the applicable Bankruptcy estate box Chapter 7 or Chapter 11 For a grantor type trust see About Grantor Type Trusts fol
32. ccc cee eh 13 Attorney Accountant and Return Preparer Fees 14 Other Deductions uci pna eR RR ad ad ia daa d Ed ee hea d a 14 Income Distribution Deduction 0 00 00 ee een RR 3 14 Estate Tax DeductiOR ios 17 Exemption 3 ener re bette netic err nels kee na ner aemhohsanes a seaweed CFI ES 18 Tax and Payee cusco aa e NS IN RE ME 18 Tax Computation Schedule G oooooooooorrrr een 18 Payments citaba dese utet menta eiua tid wath HH addu tia idad 21 Estimated Tax Penalty vaca tr eda RR x dpe aute mee aa ge on aoa Re eral fece LR etn 23 Other Information das adidas a te 23 Tax Exempt Income 2 ede bh CR RR a dha De E diode us 23 Foreign Bank Information 0 cc cece ehh he 24 Seller Provided Financing iol e e A E dae ea dete i ee Qaa PA RA A Phe bates 25 Estate Open 23 Years esee s ilem Sotelo d EU ence al US E A ER CD t RE dete 25 mone RN ee ee TII I PETIT IIT 25 The PDF Attachment Process 0000 c eee rh 26 Other BCIeBNS 6 6 0066 x4 y wood RR ORCICRCOCA AC de ijo odo ORE USE CU e C oi 28 Tax Year 2013 iii Drake Software User s Manual Supplement Fiduciaries ASS6IS SAl S ii A RAT AA AR EEE RE RA aaa 28 SN 29 Other Screens A A 30 Miscellaneous Codes for Tracking 2 0 0c eect eee e ete e enn eae 32 Form IBA TA aos ueauas esce deur d p esque ees mda xe be E TAXES TE PST LES 32 goin 4 T PTT rm 32 Signing the RETA cerro EA a RXAT RF RR ERE NER 32 POP 88
33. come W 2 W 2G 1099 R Deductions 10 Interest Do not include amount from Form 4952 sd Pee TOXOS aue O es lo aldo Figure 1 New links on screen 3 screen to W2 W2G and 1099R screens Estate Tax In previous years an estate tax deduction amount was entered on line 19 of screen 3 Deduction This field included a CTRL W worksheet so you could itemize the amounts that led to the total The new Estate Tax Deduction screen accessible through the Estate Tax Deduction link on line 19 of screen 3 has fields for income and deductions in respect of a decedent IRD and produces a worksheet showing the calculations and the total which flows to line 19 of Form 1041 and to the individual Schedules K 1 Form 8949 As was the case last year in the business packages screen 8949 accessible from the Schedule D Assets Sales tab of the Data Entry Menu has been added to the 1041 package for Form 1099 B reporting capital gains and losses from stocks bonds mutual funds and other investments on Form 8949 Sales and Other Disposition of Capital Assets Schedule D Capital Gains and Losses and Form 1099 B Proceeds from Broker and Barter Exchange Transactions Form 1099 B Proceeds From Broker and Barter Exchange Transac N OTE tions reports individual transaction information and contains cost basis fields for brokers who are required to supply such information See the field helps from screen 8949
34. creens enter that amount at the top of screen 5 Such tax exempt income might include for example e Certain death benefits section 101 e Compensation for injuries or sickness section 104 Income from discharge of indebtedness in a title 11 case section 108 If tax exempt interest and certain deductions are present in the return the program produces a Worksheet for Allocation of Deductions to Tax Exempt Income WK_B2 to be kept for your records This worksheet is not submitted to the IRS with the return The worksheet consists of four statements e Allocation of Deductions to Tax exempt Income Fiduciary Fees e Allocation of Deductions to Tax exempt Income Fees of Attorneys Accountants and Tax Preparers e Adjusted Tax exempt Interest Schedule B line 2 e Adjusted Tax exempt Income Schedule B line 12 The amounts and other information on this worksheet are calculated by the program however you can override certain lines on the worksheet as needed To do so use the WK_B2 Tax Exempt Worksheet Overrides section at the bottom of screen 5 These fields allow you to override program calculations for fiduciary attorney accounting and preparer fees Foreign Bank Information 24 If the estate or trust had an interest in or signature over a bank securities or other financial account in a foreign country click the FBAR link on line 3 of screen 5 to open the FBAR screen Due to new U S Treasury Department regulations
35. d and not repaid by e Anemployer on wages and salaries of a decedent received by the estate e A payer of certain gambling winnings such as state lottery winnings e A payer of distributions from pensions annuities retirement or profit sharing plans IRAs insurance contracts etc received by a decedent s estate or trust Any amount entered on screen 3 line 24e Federal income tax withheld adjusts the calculated amount Select the Mark if any is from Form 1099 check box if any fed eral income tax withheld and entered on this line is from Form 1099 This box will automatically be marked if federal tax withholdings are entered on screen INT DIV or 1099R Except for backup withholding withheld income tax may not be N OTE passed through to beneficiaries on either Schedule K 1 or Form 1 041 T Lines 24f and 24g of Form 1041 are used to report other payments from Form 2439 Notice to Shareholder of Undistributed Long Term Capital Gains and the refundable credit from Form 4136 Credit for Federal Tax Paid on Fuels respectively For Form 2439 complete screen 2439 the calculated amount flows from that screen to line 24f of Form 1041 Screen 2439 is accessible from the Assets Sales tab of the Data Entry Menu The line 24g amount comes from calculations of the fuel tax credit from Form 4136 Credit for Federal Tax Paid on Fuels Use screen 4136 accessible from the Credits Tax Year 2013 Drake Software User s Manual Other I
36. ding the attachment when the return is calculated To attach a PDF file to a return 1 From the return click View If anything was entered in the PDF Attachments window see Adding PDF Documents in Drake previously there will be two PDF related items in the View Print window AnFEF Message alert item 1 in Figure 13 e An Attach PDF button on the toolbar item 2 in Figure 13 Attach PDF 2 w gt 0 F Archive Email Refresh Basic Vie ER Sa A D Data Entry Print Sign Setup Select Forms to View Print All Forms Sets EF Federal Worksheets Notes Messages North Carolina 1512 ATTACHING PDF DOCUMENTS TO THE RETURN Fo the PDF documents listed on the PDF scree 1 In View mode click the paper clip ico surta pos ao Zn NBR C Lane AIR SOCIETAL ape c ch ce Boe Figure 13 The MESSAGES file 1 and the Attach PDF button 2 2 Click the MESSAGES file to view EF messages including information on how to attach the required documents to the return 27 Other Screens Other Screens Assets Sales Most screens accessible from the Assets Sales tab are similar to those in the 1040 package with the exception of the F B box on the 1041 screens Drake Software User s Manual Click the Attach PDF button The EF PDF Attachments window displays the information entered on the PDF Attachments window in data entry A red X means the document has not yet been attached a green check ma
37. ed on the PIN screen of the person who will sign the letters To generate these letters on a per return basis clear the check mark at Setup gt Options gt Optional Documents tab and in each return follow these steps 1 Open the KIL screen accessible from the Miscellaneous tab for the return This is also the LTR screen 2 Atthe bottom of the screen enter the name and title of the person who will sign the K 1 cover letter See NOTES following Tax Year 2013 Drake Software User s Manual Deductions K1G General Explanation 3 optional Select Do not print entity information in order to prevent the name and address of the estate or trust from appearing in the heading of the K 1 letter or on the coversheet produced with the letter See NOTES following If you have opted to print the K 1 letters but wish to override the name and title of the person entered on the PIN screen enter a name and title of the person to sign the letter on the fields of the KIL screen N OTES To print the coversheet with the letter globally go to Setup gt Options gt Optional Documents tab and make a selection from the K 1 Address field of the Envelope Sheet section To print a coversheet on a per return basis go to the PRNT screen of the return and make a selection from the Print K 1 envelope cover sheet drop list Review the following sections of the Drake Software User 5 Manual Tax Year 2013 before making changes to letter
38. een 1 A Withdrawal selection Yes or No from the Federal selection drop list and a selection from the State city selection drop list if applicable is required if the program is to direct tax authorities to electronically withdraw funds from the account indicated The name of the financial institution the bank s routing number RTN the client s account number and the type of account checking or savings are required The RTN Account number and Type of account must be entered twice To have a state balance due electronically withdrawn from an account other than the account indicated for federal complete the fields in the Account 2 section of the 37 Electronic Filing Foreign Accounts Common Error Codes 38 Drake Software User s Manual PMT screen Do not attempt to make payments on state taxes through the PMT screen unless the payment is for a Massachusetts New York or N OTE Texas return or a Philadelphia PA Business Income and Receipts Tax return or a Philadelphia PA Net Profits Tax return Only Massa chusetts New York and Texas and Philadelphia PA allows direct debit for tax year 2013 Due to new banking regulations regarding International ACH transactions IAT state taxing agencies are required to handle foreign transactions differently from domestic transactions For filing season 2014 no states are supporting IATs If a state payment is coming from or through an account located outside
39. en 2 to enter additional state specific information as it should appear on the state return N OTE The information fields on screen 2 apply for the resident state only Screen 2 has fields for the following information e Trust information revocable irrevocable testamentary inter vivos charitable remainder e Method of accounting cash accrual other e Grantor or fiduciary information overrides name and contact information over rides data entered on screen 1 34 Tax Year 2013 Drake Software User s Manual Making Changes on the Fly Specific data for state fiduciary trust returns must be entered manually using screens for the specific state To access state data entry select the States tab from the Data Entry Menu and then select the desired state for state specific screens Making Changes on the Fly Use the PRNT screen to override most program defaults Suppress or Force Printing To suppress or force the printing of certain documents go to the PRNT screen and select the desired options Many on the fly changes override options that are set up globally in Setup Items to The following PRNT screen options allow you to force forms and other information Print to be generated with the return Print Form 6198 Generates Form 6198 At Risk Limitations with the return Print Form 1041 I Generates Schedule I Alternative Minimum Tax Estates and Trusts with the return This option overrides the Print Fo
40. fields for Schedule A The calculation for Schedule A flows to line 13 when the return is generated Entries are also shown in the Schedule A section on page 2 of the 1041 return Worksheet WK_B2 in View mode also displays the calculations for charitable contributions allocated to tax exempt income and charitable contributions allocated to tax exempt interest For more on WK_B2 see WK_B2 Worksheet on page 24 13 Deductions Drake Software User s Manual Attorney Accountant and Return Preparer Fees Use screen 3 to enter data for line 14 Attorney accountant and return preparer fees of Form 1041 The amount entered here should include any attorney accountant and return preparer fees that were paid or incurred by the estate or trust Attorney accountant and return preparer fees deducted on Form 706 Estate and Generation Skipping Transfer Tax N OTES Return cannot be deducted on Form 1041 There are two text boxes for line 14 on screen 3 In the sec ond box enter the amount if any that is not to be allocated to tax exempt income Other Deductions Use screen 3 to enter data for lines 15a 15b and 15c of Form 1041 Figure 7 worms scd w a X Attorney accountant and reium preparerf s CUR AR ee Other deductions NOT subject to he 2 Mor Net operating loss deduction for losses from other years Allowable miscellaneous deductions Subject to the 2 floor etes Eso CG CN eee ap
41. formation and Form 1099 B then for 8949 specific information Tax Year 2013 Date of Sale or Exchange If a single date does not apply type Bankrupt Worthlss orExpired as applicable Select S or L from the Type of gain or loss drop list to have it treated as short term or long term If Expi red is entered the return must be paper filed Date of Acquisition Enter the date acquired as an eight digit number using MMDDY Y Y Y format This date is used to determine whether the sale is short term or long term Enter VARIOUS or INHERIT as applicable Only Various and Inherit are acceptable for e filing Select S or L from the Type of gain or loss drop list to have it treated as short term or long term Type of gain or loss Select from the drop list to describe the gain or loss as long term or short term Stock or other symbol Enter the stock or other symbol for the security sold Quantity sold Enter the quantity of securities sold Proceeds from sale Enter the sale amount If only the gain amount is available enter the gain amount and leave the Cost or other basis field blank Cost or other basis Enter the cost or basis If only the loss amount is available enter the loss amount and leave the Proceeds from sale field blank Federal tax withheld Enter the amount of federal tax withheld from the proceeds of a sale Wash sale loss disallowed Enter amount of wash sale loss that
42. g 35 change of name or address 7 charitable deductions 13 client billing 31 closure date 7 codes error reject 38 estimate 21 K 1 35 miscellaneous 32 comparing current year to prior year 35 contact information for estate or trust 6 cover letters 16 36 credits 16 18 19 29 30 Ctrl W detail worksheet 11 Tax Year 2013 Index date entity created 7 extension due 34 of closure or termination 7 25 payment 37 shown on return 36 dates fiscal year 6 deductible taxes 13 deductions 11 18 delay in closing estate 25 depreciation see also Form 4562 Depreciation and Amortization flowing to beneficiary 16 listing for next year 35 printing Form 4562 35 section 179 29 detail Ctrl W worksheet 11 diagnostic summary reports 35 direct debit of balance due 37 38 distributable net income DNI 18 distribution deduction 18 distribution deduction 14 distributions lump sum 18 of or from a split interest trust 32 treated as ordinary income 11 dividend and interest income 8 E elections 22 25 electronic filing e filing 37 38 funds withdrawal direct debit 37 signatures alternative 33 signatures PIN 29 32 envelope cover sheets 36 EP 37 ERO information overriding 36 error codes 38 estate bankruptcy 7 closed or terminated 7 contact information for 6 delay in closing 25 exemptions 18 Index tax deduction 17 estimated tax allocation to beneficiaries Form 1041 T 16 22 payments 21 penalty For
43. guring the amount of investment interest expense that can be deducted for the current year and the amount that can be carried forward to future years In Drake use screen 4952 accessible from the Assets Sales tab to complete this form The amount entered on screen 3 should not include the amount from Form 4952 N OTES For more information on the investment interest expense deduction click Screen Help on screen 4952 the IRS instructions for Form 4952 or Pub 550 Investment Income and Expenses Use screen 3 to enter data for line 11 Taxes of Form 1041 The amount entered here should include any deductible taxes paid or incurred during the tax year that are not deductible elsewhere on Form 1041 See the IRS instruction for the types of taxes that are deductible Fiduciary Fees Enter fiduciary fees on line 12 of screen 3 The amount entered here should include any fees the estate or trust paid or incurred to the fiduciary for administering the estate or trust N OTE Fiduciary fees deducted on Form 706 Estate and Generation Skipping Transfer Tax Return cannot be deducted on Form 1041 Note that there are two text boxes for line 12 on screen 3 In the second box enter the amount if any that is not to be allocated to tax exempt income Charitable Deductions Schedule A Tax Year 2013 The amount for line 13 Charitable deduction flows from Schedule A line 7 Use the top section of screen 4 to complete
44. he amended return Filing an Extension For calendar year estates and trusts Form 1041 and the K 1 schedules must be filed on or before April 15 2014 Fiscal year estates and trusts must file Form 1041 by the 15th day of the fourth month following the close of the tax year When the extension application is submitted the due date will be changed to the 15th day of the fifth month following the month of the regular due date To apply for an extension open the EXT or 7004 screen and select the type of return estate or trust from the drop list on line 1 If this is a short year return select the reason on line 5b If the reason is not listed go to the Explanation not described on 5b text box at the bottom of the screen and enter a reason An entry on line 6 overrides the calculated tentative total tax Amending In the Client Letter Override section if less than the total balance due is being paid the Client with the extension you can amend the client results letter to show the portion of Letter balance that is being paid An amount on this line changes the Federal Extension Amount Being Paid gt keyword This entry does not flow to Form 7004 it flows only to the client results letter N OTE Enter a value in the Client Letter Override section only if less than the tax owed is being paid with the extension State specific Information The program automatically generates a return for the estate s or trust s resident state Use scre
45. he return go to the Home window select Setup gt Options gt Optional Items on Return tab and N OTE clear the Date on return check box If you enter a date on the PRNT screen of a return that date will be shown on the return regardless of what is selected in Setup Options Listing a Different Firm Preparer or ERO on a Return 36 By default the program generates the information shown in Table 6 on the return Table 6 Firm Preparer and ERO Data that Can Be Changed on the Fly Information Description Firm Firm 1 from Firm Setup first firm entered in Setup gt Firm s Preparer Preparer who fills out the return entered in Setup gt Preparers ERO ERO from Setup gt ERO appears on Form 8879 F IRS e file Signa ture Authorization To override any of these defaults for a return go to screen 1 of the return In the bottom right quadrant of the screen select the name or number of the firm preparer and ERO Tax Year 2013 Drake Software User s Manual Electronic Filing You can also use the PREP screen accessible from the Miscellaneous tab of the Data Entry Menu to override the following information e Third party designee See Third Party Designee in the Return Preparation chapter of the Drake Software User s Manual Tax Year 2013 e Federal preparer information if the firm is not set up in Firm Setup e State preparer information if the firm is not set up in Firm Setup Electronic Fi
46. he tax return last year you will first need to update it to 2013 Prior year returns can be updated in three ways Asingle return updated one at a time using Last Year Data gt Update Clients 2012 to 2013 recommended When you open the return for the first time in the 2013 program and are prompted to update it e With all other returns in the program using Last Year Data gt Update Clients 2012 to 2013 not recommended Drake recommends using the first option updating returns individually to ensure that you update only those items in a return that you want updated When you update a 1041 return that was marked as final the pre N OTE vious year the program informs you that the return was marked as such before prompting you to proceed About the F B Field Drake Software User s Manual About the F B Field Many of the screens in the 1041 package have an F B drop list at the top of the screen where F indicates the fiduciary and B indicates beneficiary If the screen pertains to the fiduciary enter or select an F in this box If it pertains to the beneficiary enter or select a B Schedule C re N el st city 4 A Prdr Fiduciary C Bu Beneficiary Grantor Statement E StH B8radoress J Cily E IN A A a Pn an Figure 5 F B drop list on screen C Select G to have the information from the screen flow to an automatically generated grantor statement
47. installed Adding PDF To indicate in the software that a PDF document will be sent with the return Documents in Drake 1 Open the return in Drake From the Data Entry Menu click PDF Attachments accessible from the Electronic Filing section of the General tab or type PDF in the selector field and press ENTER See Figure 12 on page 27 26 Tax Year 2013 Drake Software User s Manual Attaching Documents to the Return Tax Year 2013 The PDF Attachment Process Electronic Filing and Banking PIN PIN for 1041 PMT Electronic Funds Withdrawal EF EF Selections PDF PDFAttachments fe 7 mm end a mt er pain t rn a Figure 12 Select PDF Attachments or type PDF into the selector field and press ENTER 2 Fill out the columns on the PDF Attachments screen See Table 1 for examples Table 1 PDF Attachment Window Columns Name of Column Reference Source Description Name or number of regulation publication or form instruction that makes attachments necessary Examples IRS Pub xxx 1 4 Form Instructions for 1041 Description Description of form or documentto Title of house on Oak Street be attached Appraisal of Lot 1234 File name Distinctive easily recognizable file TitleHouseOakSt paf name followed by pdf AppraisalLot1234 pdf 3 Exit the PDF Attachments window Because you ve indicated that a PDF document is attached the program generates an EF message regar
48. is differ ent from the address entered at the top of the K1 screen e Use the Amount field to override the amount of estimated taxes paid for all bene ficiaries which is entered on screen 3 line 24b If you override that amount here you must override the amount on all the K1 screens If a beneficiary did not receive any taxes paid on his or her behalf enter O here Use this override field only for allocating the amount entered on screen 3 using percentages other than those entered at the top of the K1 screen To have the depreciation amount claimed on a schedule such as Schedule C E or F rather than flow to the beneficiary s Schedule K 1 go to screen 5 and mark the K1 box that states Do NOT Carry depreciation to Schedule K 1 but to the Schedules The trust instrument state law or federal law should provide guidance Note that an estate or trust cannot make an election under section 179 to expense certain tangible property To prevent credits from a Schedule K 1 from other entities such as S corporation partnership or fiduciary from flowing to the Schedule K 1 being produced with the 1041 return go to screen 5 and mark the K1 box that states Do NOT carry credits from K1P K1F or K1S screens to the 1041 K1 You can select to generate K 1 cover letters with all 1041 returns at Setup gt Options 7 Optional Documents tab Mark the Include K 1 letters with returns check box The letters will contain the name and title enter
49. is disallowed Description Enter description of capital gain or loss item using stock ticker sym bols or abbreviations Limit 32 characters Basis not reported If the asset being entered is not being taken from a Form 1099 B indicate why by selecting an option from the drop list Adjustments Up to three adjustments per screen are permitted For each adjust ment select the applicable code from the drop list and enter the amount of adjustment and AMT adjustment if applicable to the gain or loss AMT Several AMT telated fields are included on screen 8949 The Capital Gains and Losses worksheet D AMT will use the same number as the regular Schedule D unless entries are made in the AMT Adjust to gain loss and AMT Cost Basis fields on screen 8949 Ifthe U S Real Property sold by a nonresident box is marked the program might have to do a special calculation for line 30 of Form 6251 AMT Individ uals see Form 6251 instructions for more information Income Screen D2 Carryovers amp Other Entries Drake Software User s Manual Amount of gain or loss subject Enter amount of gain or loss subject to 28 rate e State Use Only Check with your state for required codes e Summaries If you are reporting only the totals of 1099 B transactions rather than reporting individual transactions read the notes at the bottom of the 8949 screen For information on using paper document i
50. k the 6252 link from line 5 of screen 5 Estate Open 2 Years Elections Tax Year 2013 Mark box 8 on screen 5 if the decedent s estate has been open for more than two years The IRS requires a separate explanation for the delay in closing the estate To create this explanation in the program go to the SCH screen select R from the Type of attachment drop list enter the explanation in the large text box on that screen and enter a title at the bottom of the screen A statement entitled REG NOTE is generated in View mode The ELEC Election Options for 1041 screen allows the preparer to make various elections from the IRS code If you mark a box on this screen go to the SCH screen to produce a statement for the election From the Type of attachment drop list on the SCH screen select E Election Explanation as shown in Figure 10 Enter an explanation for the election in the text box At the bottom of the screen enter a title for the statement 1f you wish SCH Unformatted Attachment to Return FB F im Type of attachment statement number and title E Election Explanation For cer Multi form code The trust made this election because P Ane edite at ad PP dne ep o pn Figure 10 Completing election statement on SCH screen The program produces a Preparer Note listed as Election in View Print mode noting the election selected Figure 11 on page 26 25 The PDF Attachment Process
51. ling Steps for e filing a 1041 are same as for a 1040 See the Drake Software User s Man ual Tax Year 2013 for details For information on signing the return electronically see Signing the Return on page 32 N OTE Short year return cannot be e filed unless they are initial year or final year returns Electronic Funds Withdrawal Direct Debit Program Defaults and Overrides Required Information State Balance Due Tax Year 2013 Use the PMT screen accessible from the General tab to indicate that funds due are to be electronically withdrawn direct debited from an account By default the program indicates that the entire balance due is to be electronically withdrawn on the return due date unless otherwise indicated Balance due To indicate that only part of the balance due should be withdrawn from the account enter the amount to be withdrawn in one or both of the payment amount override fields Federal payment amount or State payment amount Payment date Use the Requested payment date override fields to request a payment date other than the due date If the return is e filed on or before the due date April 15 of a calendar year the requested payment date cannot be later than the due date If the return is transmitted after the due date the requested payment date cannot be later than the current date Phone number An entry in the Daytime phone number field overrides the phone number entered on scr
52. located to tax exempt income 1 applying deductions against ordinary income 2 allocating income type 3 Below line 29a on screen 3 is an Apply deductions against non capital gain income first check box item 2 of Figure 6 If you mark this box the deductions entered on lines 10 through 19 of screen 3 will be applied against ordinary income and will preserve the preferential tax rate so that the beneficiaries receive maximum capital gain treatment For more information see the field help for this check box or the IRS instructions Drake has provided override fields on screen 3 item 3 in Figure 6 that allow you to allocate amounts from certain lines to certain income NOTE types rather than allowing the program to allocate the expenses according to character of the income The total for these boxes should be no more than the total of all deductions listed in lines 10 through 15c 12 Tax Year 2013 Drake Software User s Manual Deductions Interest Deductions Taxes Use screen 3 to enter interest amounts for line 10 Interest of Form 1041 See the IRS instructions or consult the field level help on for line 10 or click Screen Help on screen 4952 for the types of interest to include on that line Form 4952 Investment Interest Expense Deduction may be required if the estate or trust wishes to claim a deduction for investment interest expense see Form 4952 instructions for exceptions Form 4952 is used for fi
53. lowing If the return is for a Pooled Income Fund mark that box For more information see the field help for the Pooled Income Fund check box If the entity is a trust and must distribute all of its income during the N OTE year indicate that in the Yes and No check boxes in the Other Infor mation section on the right side of screen 1 Ifthe entity 1s a grantor type trust make a selection from the Grantor type trust drop list on screen 1 and then click the Form GRS hyperlink to open the GRS screen Screen GRS is also accessible from the Grantors Schedules tab N OTE If you select G from the Grantor type trust drop list on screen 1 pages 1 and 2 of Form 1041 will not contain any amounts Income and expenses entered on certain data entry screens such as screen C for business income screen DIV for dividend interest screen E for real estate income and expense or screen F for farm income and expense will flow to the grantor statement GRANTOR in View mode if you select G from the F B drop lists on those screens see Figure 5 on page 6 It is not necessary to enter all the income and Income Income Drake Software User s Manual expense amounts on the GRS screen you must however enter the grantor s name address and tax ID number on the GRS screen Consult the screen help and field level helps for more information on completing screen GRS In Drake much of the information for the Income sec
54. lso be displayed As always a green check mark is displayed in the EF Status column of the Calculation Results window see Figure 2 when the default product Form 1041 is eligible for e file and a red X is displayed when the product has EF messages keeping it from being e file eligible Summary Details Gross Income Taxable Income Total Tax Refund Balance Due Payment Method EF Status Federal 300 D 0 0 Not Selected Amended N N A N A N A N A Form 7004 N A N A N A N A N A Not Selected NC407 AMD 300 300 D D 0 Not Available eam iiA tata nn A dennan da to an Mr Mh me ait ados amm Figure 2 More indicators are available in the EF Status column For details on the Calculation Results window see Chapter 6 Return Results of the Drake Sofiware User s Manual Tax Year 2013 Searchable The selector field located at the bottom of all Data Entry Menus Figure 3 can now Selector search for screens by screen code name or keyword Field O IS A O GS _ 8845 Indian Employment Credit 8846 Employer FICA Taxes on Tips Frequently Asked Questions Figure 3 Searchable selector field You can still type a screen code state abbreviation or form number in the selector 4 Tax Year 2013 Drake Software User s Manual Updating a Prior Year Return in Drake Electronic Signatures e Sign Required Fields field and press ENTER to open a particular screen but for those times when you can t
55. m 2210 23 etter 36 exemptions 18 extensions for Form 1041 34 for Form 1041 A 32 for Form 5227 32 tax paid with prior 22 F F B boxes on screens 6 FBAR Report of Foreign Bank and Financial Accounts 24 fees of attorney accountant and tax preparer 14 24 fees fiduciary 13 24 fiduciary applying a screen to a 6 entering information for 6 fees 13 24 information overrides 35 filing instructions 36 final 1041 returns 7 K 1 schedules 16 opening a return marked as 5 financing seller provided 25 firm information overriding 36 fiscal year returns 6 foreign accounts using to pay a balance due 38 bank 24 beneficiaries 15 tax credit 19 Form 56 Notice Concerning Fiduciary Relationship 31 Form 706 Estate and GST Tax Return 13 14 Form 1041 A U S Information Return Trust Accumula tion of Charitable Amounts 32 Form 1041 T Allocation of Estimated Tax Payments to Beneficiaries 16 22 Form 1045 Application for Tentative Refund 31 Form 1099 B Proceeds From Broker and Barter Exchange Transactions 9 Form 1099 R Distributions From Pensions Annuities etc 11 Form 1116 Foreign Tax Credit 19 Form 2210 Underpayment of Estimated Tax by Individu als Estates and Trusts 23 Form 2439 Notice to Shareholder of Undistributed Long Term Capital Gains 23 Form 2848 Power of Attorney and Declaration of Repre vi Drake Software User s Manual Supplement Fiduciary sentative 31 Form 3468 Investment Credit 29 Form
56. ndicators with e filed returns see Paper Fil ing Forms and Supporting Documentation Form 8453 on page 255 of the Drake Software User s Manual Tax Year 2013 For information on attaching PDF docu ments to e filed returns see The PDF Attachment Process on page 26 Screen D2 has fields for short term gains losses from other sources long term gains losses from other sources loss carryovers from the prior year and capital gain tax computation If Drake was used for the taxpayer last year the loss carryover fields are updated automatically The fields on lines 17 and 18 are override fields If either line 1s used then all fields must be completed Amounts entered in them override program calculations for lines 17 18 and 19 on Schedule D and affect the calculation of line 4 of Form 1041 Amounts under the Beneficiaries column also flow to the appropriate line of Schedule B and amounts under the Fiduciary column flow to the capital gain calculation For information on using these fields click inside a field on line 17 and press Fl Rents Royalties etc Schedule E Use screen E to enter most Schedule E information The Schedule E calculation flows to line 5 of the return Page 2 of Schedule E Parts Il through V is calculated from K 1 schedules The corresponding screens in Drake E2 E3 and E4 pri marily contain override fields data entered on those screens over N OTE rides amounts that would otherwise flow from the
57. nformation tab to complete Form 4136 the calculated credit flows to line 24g of Form 1041 Screen 4136 consists of two screens The first screen covers lines 1 N OTE through 8f and the second screen covers lines 9 through 16b To access the second screen from the first press PAGE DOWN Estimated Tax Penalty Form 2210 Underpayment of Estimated Tax by Individuals Estates and Trusts is used to determine whether a penalty is owed for underpaying estimated tax and to determine the amount of the penalty In Drake use screen 2210 accessible from the Other Forms tab or the 2210 link on screen 3 to complete Form 2210 When the return is generated the calculation from screen 2210 flows to Form 1041 line 26 Estimated tax penalty If screen 2210 is not used a tax penalty amount can be directly entered on line 26 of screen 3 If you do use screen 2210 an entry on screen 3 is not necessary If you use the 2210 screen and enter a number on line 26 of screen 3 the program uses the calculation from the 2210 screen To calculate the tax penalty the program uses the amount of tax paid from the previous year If the return was not updated from last year you N OTE must manually enter the amount of tax paid To do so go to screen 1 and complete the 2210 Section in the bottom right corner of the screen Applying OP On line 29a of screen 3 enter any overpayment that your client would like applied to to Next next year s estimated tax
58. om of the DIV screen are new fields for entering by amount or percentage state municipal interest A check box was added to screen 8829 for using the optional Safe Harbor Method of computing the amount of deduction being claimed for an office in home With this method only the square footage of the office and the square footage of the home is entered and the program computes the deduction based on 5 per square foot for a maximum of 300 square feet or a maximum of 1 500 The new K1G screen General Explanation for Schedule K 1 creates statements that allow you to explain every line of Schedule K 1 From drop lists on screen K1G select a line from Schedule K1 you wish to explain select a K 1 recipient then enter an explanation for the line The statement will be attached to the 1041 return Leave the ID and Name field blank and the explanation will go to all K 1 recipients Instead of preparing Appendix A Statement by Taxpayers to Determine a Theft Loss Deduction listed in Drake12 as 2009 20 in View mode and in Tools gt Blank Forms Drake now generates page 3 of Form 4684 Casualties and Thefts Data entry is made in Section C of screen 4684 New e mail address phone number and fax number fields for the clients have been added to screen 1 Name Address General Information These fields are for reports only and are not included in the e file record Due to new U S Treasury Department regulations all Bank Secrecy Act
59. orm 8845 Indian Employment Credit 8846 Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips 8864 Form 8864 Biodiesel and Renewable Diesel Fuels Credit 8874 Form 8874 New Markets Credit 8881 Form 8881 Credit for Small Employer Pension Plan Startup Costs 8882 Form 8882 Credit for Employer Provided Child Care Facilities and Services 8896 Form 8896 Low Sulfur Diesel Fuel Production Credit 8907 Form 8907 Nonconventional Source Fuel Credit 8908 Form 8908 Energy Efficient Home Credit 8909 Form 8909 Energy Efficient Appliance Credit 8910 Form 8910 Alternative Motor Vehicle Credit 8911 Form 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Form 8912 Credit to Holders of Tax Credit Bonds 8936 Form 8936 Qualified Plug in Electric Drive Motor Vehicle Credit 8941 Form 8941 Small Employer Health Insurance Credit Other Screens 30 Many screens from the Other Forms tab have been covered elsewhere in this manual Listed in Table 4 on page 31 are those Other Forms tab screens that are available but are not covered in this document For more information on using those screens listed below that have equivalents in the 1040 package see the Drake Software User s Manual Tax Year 2013 You can also use the screen help and field level helps for Tax Year 2013 Drake Software User s Manual Other Screens Miscella neous Tab Tax Year 2013 individual screens Table 4 Othe
60. r Screens Available From Other Forms Tab Screen Screen or Form SS4 Application for Employer Identification Number 56 Form 56 Notice Concerning Fiduciary Relationship 1045 Form 1045 Application for Tentative Refund 2848 Form 2848 Power of Attorney and Declaration of Representative 4970 Form 4970 Tax on Accumulated Distribution of Trusts 8082 Form 8082 Notice of Inconsistent Treatment or Administrative Adjustment Request AAR 8275 Form 8275 Disclosure Statement 8582 Passive Activity Loss Limitations 8821 Form 8821 Tax Information Authorization 8822 Form 8822 Change of Address 8829 Form 8829 Expenses for Business Use of Your Home 8855 Form 8855 Election to Treat a Qualified Revocable Trust as Part of an Estate 8886 Form 8886 Reportable Transaction Disclosure Statement 8903 Form 8903 Domestic Production Activities Deduction 8948 Explanation for Not Filing Electronically NOL Schedules A 8 B of Form 1045 Many screens from the Miscellaneous tab have been covered elsewhere in this manual Listed in Table 5 are those Miscellaneous tab screens that are available but are not covered in this document For more information on using those screens listed below that have equivalents in the 1040 package see the Drake Software User s Manual Tax Year 2013 You can also use the screen help and field level helps for individual screens Table 5 Other Screens Available From Miscellaneous Tab
61. rk indicates an attached document Figure 14 Drake 2013 EF PDF Attachments lt Required PDF Attachments The list below contains PDF Attachments that are required for electronic filing Select an item from the list and click Browse to locate the associated PDF file Items with a green check mark already have the PDF file Items with a red lt are missing the required PDF File Reference Description Required PDF FileName OLI TENUTI TREES e 1041 Instructions Mortgage Documents MORTGAGE PDF Come Figure 14 The EF PDF Attachments window Click the row of a document to attach Click Browse Browse to the proper folder select the PDF file to attach and click Open or dou ble click the file name Repeat for all documents with a red X When all documents have been attached to a completed return and show a green check mark recalculate the return If all EF mes sages have been resolved the return is ready to be e filed Drake provides numerous screens that are not always needed for completing Form 1041 These screens are accessible through the Assets Sales tab the Credits tab and the Other Forms tab Most of them work in the1041 program just as they do in the 1040 program Information on these screens and forms is available in the Drake Software User s Manual Tax Year 2013 The following sections provide further information on these screens Available Many ofthe Assets Sales screens have
62. rm 6251 only when required option in Setup gt Options gt Form amp Schedule Options Print Form 8582 Generates Form 8582 Passive Activity Loss Limitations with the return Print Form 4562 Generates Form 4562 Depreciation and Amortization with the return This option overrides the Print Form 4562 only when required option in Setup gt Options gt Form amp Schedule Options Print Form 8960 Generates Form 8960 Net Investment Income Tax Individ uals Estates and Trusts Print next year depreciation listing Select this box to generate the next year s depreciation schedule This option overrides the Next year depreciation sched ule option in Setup gt Options gt Form amp Schedule Options Print summary Select this box to print a diagnostic summary report with the tax return The summary report lists the forms calculated and provides a brief summary of the return Print comparison Select this box to include a one page report comparing the client s 2013 return to the 2012 return when the return is generated Print K 1 codes Schedule K 1 page 2 Schedule K 1 consists of two pages page 1 is the form itself and page 2 consists of K 1 code explanations By default Drake generates only the first page of the K 1 To have page 2 generated with the return select this box Alternative Electronic Signature PIN The preparer s alternative PIN entered here must match the one created in Setup gt
63. rmation from being generated 36 printing options for suppressing forcing documents 35 prior year minimum tax 19 returns updating 5 proformas suppressing 36 R recapture taxes 20 reject codes 38 resident state 6 15 returns vil Index amending 7 33 final 7 initial 7 updating 5 S Schedule A Charitable Deduction 13 Schedule B Income Distribution Deduction 14 Schedule C Business Income or Loss 8 Schedule D Capital Gains and Losses 9 entering AMT cost basis on 9 entering data for 9 Schedule E Supplemental Income and Loss 10 Schedule F Profit or Loss from Farming 11 Schedule G Tax Computation 18 Schedule H Household Employment Taxes 20 Schedule I Alternative Minimum Tax Estates and Trusts 18 35 Schedule J Accumulation Distribution for Certain Com plex Trusts 15 Schedule K 1 Form 1041 10 15 17 see also K 1 Schedule K 1 Form 1065 10 Schedule K 1 Form 1120S 10 section 179 depreciation 29 642 c charitable or other deductions 32 643 g Form 1041 T 22 645 election 7 Selector field 4 seller provided financing 25 short form suppressing 36 year returns 37 signatures electronic 29 32 split interest trusts 7 32 state data entry 35 short form suppressing 36 summary reports 35 suppressing items from return 36 T tax and payments 18 deductible 13 exempt income 23 exempt interest 14 household employment 20 paid with extension 22 penalties estimated 23 preparer fees 14 24
64. s Executors and Administrators As is the case on the Assets Sales tab most of the screens available through the Credits tab are identical to their counterparts in 1040 returns Many of the Credits screens have been covered elsewhere in this manual Listed in Table 3 are those Credits screens that are available but are not covered in this document Table 3 Other Screens Available From Credits Tab Screen Form and Credit 3468 Form 3468 Investment Credit 5884 Form 5884 Work Opportunity Credit 6478 Form 6478 Alcohol and Cellulosic Biofuels Credit 6765 Form 6765 Credit for Increasing Research Activities CR Form 8582 CR Passive Activity Credit Limitations 29 Other Screens Drake Software User s Manual Table 3 Other Screens Available From Credits Tab Screen Form and Credit 8586 Form 8586 Low Income Housing Credit 8609 Form 8609 Low Income Housing Credit Allocation and Certification 8820 Form 8820 Orphan Drug Credit 8826 Form 8826 Disabled Access Credit 8834 Form 8834 Qualified Plug in Electric and Electric Vehicle Credit Form 8834 has expired for the current year and has not been released for 2013 The credit will apply only if there is a passive carryover from a prior year 8835 Form 8835 Renewable Electricity Refined Coal 8 Indian Coal Production Credit 8844 Form 8844 Empowerment Zone and Renewal Community Employment Credit 8845 F
65. s for Form 1041 Tax Year 2013 Drake Software User s Manual Tax and Payments Payments Estimated Payments and Amount Applied from Prior Year Estimated Payments Allocated to Beneficiaries Tax Year 2013 Generally an estate or trust must pay estimated income tax if it expects to owe 1 000 or more in tax and expects the withholdings and credits to be less than the smaller of e 90 of the tax shown on the current year return e 100 ofthe tax shown on the prior year return Drake offers several ways to enter estimated tax amounts that were applied from the prior year tax return and paid in the current year The preferred method is to enter quarterly and total amounts on the ES screen accessible from the Other Forms tab Estimated Taxes Enter the estimated taxes due for next year on the right side of the screen in the Estimate Amt fields From the ES Code drop list choose how you want payment vouchers to be printed with the return Press F1 to view the full code descriptions e Overpayment of Taxes For overpayment of taxes make a selection from the OP Code drop list and enter the amount of the overpayments in the applicable text boxes on the right side of the screen Press F1 to view the full code descriptions On screen 3 line 24a 2013 estimated tax payments and amount applied from 2012 is an adjustment field an amount entered here adjusts is added to the amount entered on the ES screen for estima
66. sible from the Credits tab 19 Tax and Payments Recapture Taxes Household Employment Net Investment Income Tax Line 7 Computation 20 Drake Software User s Manual If the estate or trust disposed of investment credit property or changed its use before the end of its useful life or recovery period fill out Form 4255 Recapture of Investment Credit screen 4255 and figure the recapture allocable to the estate or trust When the return is generated the amount flows from the 4255 screen to line 5 of Schedule G If the estate or trust disposed of property or there was a reduction in the qualified basis of the property on which the low income housing credit was figured fill out Form 8611 Recapture of Low Income Housing Credit There is no screen in Drake for Form 8611 A blank copy is available from Tools gt Blank Forms Once the amount of recapture credit has been figured using this form enter that amount in the corresponding field of line 5 in the Schedule G section of screen 4 Household employment taxes are reported on Schedule H screen H in Drake accessible from the Other Forms tab When the return is calculated the total flows to line 6 of the Schedule G New for 2013 Use screen 8960 Net Investment Income Tax to complete Form 8960 Net Investment Income Tax Individuals Estates and Trusts used to report the 3 8 percent Net Investment Income Tax that now applies to individuals estates and trusts that
67. ssive Activity Credits Prior Year Minimum Tax Bond Credit Tax Year 2013 the fields on line 2e in the Schedule G section of screen 4 In the first field of line 2e enter the name of the form and in the second field enter the dollar amount for the credit Other credits are claimed by entering amount directly onto data entry screens Most of these credits are listed on the Credits tab of the Data Entry Menu Line 2a Foreign tax credit is calculated by the program based on information entered on screen 1116 for Form 1116 Foreign Tax Credit There is no input field for line 2a on screen 4 Use screen 3800 to fill out Form 3800 General Business Credit This screen consists mostly of override fields for passive activity credits see Passive Activity Credits following data should be entered in the override fields only to override the program s calculated amounts from Form 3800 Part III General Business Credits or Eligible Small Business Credits Part lll was added to the form to reflect all the general business credits N OTE reported on Form 3800 and to identify the type of credit being reported General Business Credits GBC or Eligible Small Business Credits ESBC In Drake use screen GBC to complete Part III The GBC screen is used for reporting the following types of information e Data for current year credits reported on forms Drake does not support To enter data for a credit programmed into Drake
68. stments for Schedule A line 4 of Schedule B This field is an adjustment field an amount entered here combines with the amount entered on line 4 of Schedule A This pertains only to Tax Year 2013 Drake Software User s Manual Deductions Total Distributions Schedule K 1 Schedule K 1 Part Schedule K 1 Part Il Tax Year 2013 trusts other than simple trusts Line 11 Total distributions of Schedule B is calculated automatically by the program when the return is generated If the calculated amount is greater than the amount on line 8 and your client is filing for a complex trust that has previously accumulated income Schedule J Accumulation Distribution for Certain Complex Trusts may be required Use screen J accessible from the Other Forms tab to complete Schedule J in Drake Schedule K 1 Form 1041 is used to report a beneficiary s share of income deductions and credits from either a trust or a decedent s estate In Drake many of the amounts generated on Schedule K 1 flow from elsewhere in the program For example the amount for line 1 Interest income of the K 1 is calculated from the interest income amount entered on screen 3 and or the INT screen Use the override fields on the K1 screen to override program calculations To see the source of data for a particular field on the K1 screen press F1 in the field To see the formula used when calculating the amount for the K1 and for general
69. t ap qe Sd RR di ERI d iba i RS Figure 7 Lines 15a and 15b on screen 3 Note that line 15a is for other deductions not subject to the 2 floor while line 15c is for allowable miscellaneous itemized deductions that are subject to the 2 floor An amount entered in the Portion of first column not allocable to tax exempt fields to the right of the 15a and 15c fields are not allocated to tax exempt income The LOSS link shown in Figure 7 takes you directly to the LOSS N OTES Screen where NOL carryforwards can be recorded For examples of deductions that can be reported on lines 15a and 15c see the IRS instructions for Form 1041 Income Distribution Deduction Schedule B Adjusted Tax Exempt Interest Sch A Line 4 14 Adjustment Income distribution deduction information flows from entries made elsewhere in the program This section covers Schedule B Income Distribution Deduction and Schedule K 1 of Form 1041 The amount for line 18 Income distribution deduction on page 1 of the 1041 return flows from line 15 of Schedule B Income Distribution Deduction Schedule B which is used to determine the estate s or trust s income distribution deduction is completed from screen 4 Enter adjusted tax exempt interest on line 2 of screen 4 Note that line 2 is an override field An entry here overrides the calculated amount Section Schedule B of screen 4 has a field for line 4 Adju
70. t s estate see Schedule K 1 on page 15 Farm Income or Loss Schedule F Use screen F accessible from the Income tab to enter farm income or loss Information from screen F flows to line 6 Farm income or loss of Form 1041 Screen F in the 1041 package is almost identical to screen F in the 1040 package For details on completing screen F see the Drake Software User Manual Tax Year 2013 N OTE Do not use screen F to report farm rental income and expenses based on crops or livestock produced by a tenant Use screen E instead Gain or Loss From Sale of Assets Form 4797 Information entered on screen 4797 accessible from the Assets Sales tab flows to line 7 Ordinary gain or loss of Form 1041 or to line 14 of Schedule D Screen 4797 in the 1041 package is almost identical to screen 4797 in the 1040 package For details on completing screen 4797 see the Drake Software User s Manual Tax Year 2013 Other Income Use screen 3 to enter amounts for line 8 Other income of Form 1041 Enter any type of income that is not reported on lines through 7 Note that line 8 on screen 3 has two text boxes enter the income type in the first box and the amount in the second Use a CTRL W worksheet to list multiple Other income items Information entered on the CTRL W worksheet appears in an OVERFLOW statement when the return is generated Items reported on line 8 include e Unpaid compensation received by the estate
71. t the beneficiary received For instance to divide the income deductions or credits equally among four federal K 1s enter 25 for 25 percent in each beneficiary s Fed text box e Foreign beneficiary Mark the Foreign beneficiary box to indicate that the beneficiary is a nonresident alien individual a foreign corporation or a foreign estate or trust 15 Deductions 16 Schedule K 1 Part Ill Form 1041 T Flow of Depreciation Flow of Credits K 1 Cover Letters Drake Software User s Manual The K1 screen also has check boxes for indicating an Amended K 1 and a Final K 1 N OTE From the K1 screen press PAGE DOWN to create additional K 1 sched ules Part III of the Schedule K 1 Beneficiary s Share of Current Year Income Deductions Credits and Other Items is completed automatically by the program based on information entered elsewhere in the program Use the corresponding fields on screen K1 only if you want to override program calculations for a particular item For instance if you place an entry in the override field of line 2a Ordinary dividend income the program accepts this amount otherwise the program uses the amount calculated on WK K1 worksheet multiplied by the beneficiary s percentage At the bottom of K1 screen are two override fields for Form 1041 T Allocation of Estimated Tax Payments to Beneficiaries e Use the Address field to enter an address if the address for Form 1041 T
72. ted tax payments for the current year and overpayments from the prior year If you choose to adjust the amount from the ES screen enter in this field any estimated tax payments made with Form 1041 ES for the current year plus the amount of any overpayment from the prior year return that was applied to the current year s estimated tax Do not include on Form 1041 any estimated tax paid by an individ ual before death Instead include the payments on the decedent s final income tax return N OTES See Form 1041 instructions for more information on estimated taxes For more information on using the ES screen see the Esti mated Taxes section of the Drake Software User s Manual Tax Year 2013 To apply overpayment to next year s tax see Applying OP to Next Year s Tax on page 23 of this document Form 1041 T Allocation of Estimated Tax Payments to Beneficiaries is used to elect under section 643 g to have part of an estate or trust s estimated tax payments but not income tax withheld treated as having been made by the beneficiary or beneficiaries The 1041 T must be filed within 65 days of year end or the election is invalid To indicate this election in Drake complete the fields amount and a date for line 24b on screen 3 The program generates Form 1041 T if an amount is entered for line 24b When the return is calculated the amount entered here flows to Form 1041 T to line 10 of Schedule B of Form 1041 and
73. third party designee is entered on the PREP screen To use Form 8453 F leave the PIN screen blank If no EF messages are present when the return is generated the software produces Form 8453 F by default Once the e filed return is accepted by the IRS mail Form 8453 F to the IRS within five days Amending a Return Tax Year 2013 To file an amended Form 1041 Open screen 1 and select the Amended return box in section F Correct or add new information on the appropriate lines of the return Re figure the estate s or trust s tax liability Click the Amended Expl link beside the Amended return box on screen 1 On the Amended Changes screen MOS ANS a Enter the number of the line you changed b Describe the line you changed For instance you might enter Interest Income if you changed line 1 of page 1 of Form 1041 C Enter previous and amended amounts d Enter an explanation 5 Press PAGE DOWN for another screen to explain another change 33 Filing an Extension Drake Software User s Manual If an amended return results in a change to income distribution or other information provided to a beneficiary an amended Schedule K 1 must also be filed with the 1041 and copies given to each beneficiary To have the program generate an amended Schedule K 1 go to the K1 screen and select the Amended K 1 box N OTE If the total tax is larger on the amended return taxpayer should gen erally pay the difference with t
74. tion of Form 1041 is generated from several sources Direct entry on screen 3 If you enter an amount directly on screen 3 be aware that it will be added to any other amounts flowing to the same line from other screens Calculations from other screens For example line 3 Business income or loss is calculated from entries on screen C for Schedule C As another exam ple the amount on line 1 Interest income might be affected by amounts flow ing from screen 3 Income Deductions and Payments screen INT Form 1099 INT or screen 6252 Form 6252 Installment Sales Interest and Dividends Use screen INT to enter information from Form 1099 INT and use screen DIV to enter information from Form 1099 DIV You can also enter interest and dividend information on screen 3 in the fields for lines 1 2a and 2b however be aware that any amounts entered on the INT and DIV screens will be added to the corresponding amounts on screen 3 The INT and DIV screens in the 1041 package accessible from the Income tab or by typing INT or DIV into the selector field and pressing ENTER or clicking the links on screen 3 are similar to those in the 1040 package For information on entering amounts as percentages and entering state specific information see the Drake Software User s Manual Tax Year 2013 Business Income or Loss Schedule C If the estate or trust operated a business use screen C Schedule C to report income
75. to Schedule K 1 for each beneficiary 21 Tax and Payments Tax Paid with Extension Federal Income Tax Withheld Other Payments Forms 2439 22 and 4136 Drake Software User s Manual Returns with an amount of line 24b of screen 3 cannot be e filed Make sure you have the beneficiary information filled out with a fed eral percentage entered on the K1 screens N OTES To override the calculated amount for a beneficiary open the bene ficiary s K1 screen and enter an amount in the Amount field of the 1041 T Entries section at the bottom of the screen This amount is also carried to column d of Form 1041 T If Form 7004 was filed previously and Form 1041 is now being filed use screen 3 to complete line 24d Tax paid with Form 7004 of Form 1041 Note that this line on screen 3 consists of a 7004 check box a field for entering the amount of tax paid and a link to screen 7004 for completing the form For more information on filing Form 7004 see Filing an Extension on page 34 To indicate that an extension was previously filed and that tax was paid at the time of the extension request 1 On screen 3 line 24d select the 7004 check box 2 Onthe same line enter the amount of tax paid with the extension request Federal income tax withheld reported on screens 8949 1099 INT DIV W2 W2G K1P K1F and KIS flows to line 24e of Form 1041 automatically This includes any federal income tax withhel
76. ves as consent to electronic funds withdrawal direct debit for payment of balance due To e file using Form 8879 F complete all fields on the PIN screen including the title and signature name of the fiduciary or officer Setup gt ERO must still be completed for e filing See the IRS instructions for further details on signature requirements If the return is not prepared by a paid preparer go to screen 1 and N OTES select None for Firm and Preparer Use Form 8453 F to file the e Signing Form 8879 F Form 8453 F return electronically To use an alternative electronic signature see the field level help for the Alternative Electronic Signature PIN text box on the PRNT screen available from the Miscellaneous tab You can take advantage of the new e Signature feature of Drake Software and use an electronic signature pad to sign and have your client sign Form 8879 F For details see Chapter 6 Return Results of the Drake Software User 5 Manual Tax Year 2013 Form 8453 F U S Estate or Trust Income Tax Declaration and Signature for Electronic Filing is used to authenticate the electronic Form 1041 authorize the e filer to transmit via a third party transmitter authorize direct debit for payment of balance due and serve as a transmittal for any accompanying paper documents Use this form if the preparer is not a paid preparer if the preparer does not belong to a firm entered in Setup gt Firms or if a
77. ws from Schedule G calculations Drake makes these calculations when generating the return results are shown on line 7 of the Schedule G section on Form 1041 page 2 with the total tax flowing to line 23 of page 1 Much of the information used to figure the total tax comes from data entered elsewhere in the program such as for tax credits but some comes from direct entry in the Schedule G section of screen 4 An amount on line 1b of Schedule G comes from calculations made when data is entered on screen 4972 Schedule I Form 1041 Alternative Minimum Tax Estates and Trusts is used to compute the DNI income distribution deduction on a minimum tax basis and the estate s or trust s alternative minimum tax AMT In Drake all Schedule I computations are made automatically To override any of the calculated amounts use screen I accessible from the Other Forms tab N OTE No entries are required on screen I unless you want to override the amounts that are automatically calculated by Drake Schedule I is printed with the return only when needed To force the program to print the Schedule I go the PRNT screen accessible from the Miscellaneous tab and select Print Form 1041 I Schedule I AMT in the Items to Print section To claim a credit other than those appearing on lines 2a through 2d of Schedule G use Tax Year 2013 Drake Software User s Manual Tax and Payments Foreign Tax Credit General Business Credits Pa

Fiduciaries (1041)

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