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Complexities of a California Trust Tax Return Requires Experience

What is Included in a California Trust Tax Return?
In addition to the federal IRS Form 1041 required to be filed by trusts each year, the California Franchise Tax Board requires annual filing of income and distribution statements for California Trusts. The trust fiduciary or trustee is responsible for the timely filing of trust tax returns and the maintenance of all records relating to the trust's income and distributions.

The backbone of the tax return for a California trust is the Franchise Tax Board Form 541, California Fiduciary Income Tax Return. The Form, 541 is similar to an individual income tax return, which accounts for income, losses, deductions and credits and ultimately determines an amount due by the fiduciary on behalf of the trust.

Attached to form 541 are various schedules that as a whole make up the entire tax return of a California Trust. The schedule K-1, Beneficiary's Share of Income, Deductions, Credits, Etc., is probably the most familiar to anyone who receives distributions from a California Trust. This form is used to account for the distributions made to each beneficiary of a trust.

The fiduciary of the trust must file a schedule K-1 for each beneficiary as part of the trust tax return and he or she must provide each beneficiary with his or her individual copy of the K-1. The California Schedule K-1 must even be provided to California non-residents because any income of the trust sourced in California (resulting from investments or activities within the state) and later distributed to a non-resident is subject to California tax.

Trusts, just like individuals, may receive an income tax refund from the State of California after filing a trust tax return. Similar to individuals, any trust that expects to owe more than $500 a year in tax must remit estimated tax payments to the Franchise Tax Board along with a form 541-ES. The fiduciary of the trust is responsible for completing this form and remitting payments to the Franchise Tax Board.

For over 30 years Tucker Cheadle has acted as a fiduciary, trustee, executor, and administrator on more than 70 trusts. Clients continue working with Cheadle Law year after year because of the expertise in handling all trust matters including tax returns. For the most accurate handling of your trust and trust tax return by an experienced trustee, contact Tucker Cheadle at Cheadle Law at 949.553.1066.

A review of any materials on this web page, any preliminary comments or an introductory meeting does not constitute legal, income tax or accounting advice upon which reliance can be placed. The attorney client relationship can only be created by a written retainer agreement following a check of potential and actual conflicts of interest with other clients.
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