Funeral fund issued a 1099 because funeral director made an error and they wont fix it.

Not a nightmare. We're discussing peanuts. Assuming you are the beneficiary of your father's estate, just ask the funeral director to give you the $120. Put $190 on your return as interest and if you itemize, the $70 is a miscellaneous itemized deduction for the production of taxable income (you may or may not be able to actually deduct this). Even, without the deduction, the tax on $190 is going to be less than the $120 you should get from the funeral director.

too late for this?

OP stated "I received an account statement for the year 2013 with gross interest of 190.00 and net interest 120.00." So, the IRS has a report that the trust has 2013 income. What now?

So what. The IRS is not going to be looking for a 1041-QFT. The cost of billing someone for the tax on $120 is more than the cost of the tax. Technically, a funeral trust ends at death. The money belongs to the beneficiary as the grantor is deceased. The beneficiary should report it.

Thanks Alan, That sounds great and I don't mind putting that on my own return as I am the beneficiary. What worries me is how will the IRS know that the tax form sent to the IRS by the funeral trust in my dads name with his SS# is satisfied by my adding the interest to my return? The funeral trust sent the tax form to my dad so the IRS has a form with his name and SS# with a taxable gross interest of 190. Am I missing something or too paranoid? I did file his final tax return but there wasn't supposed to be the need for a 1041 till this came. Thanks again - Steve

I thought the whole point of a Funeral trust was that the Funeral Home was the beneficiary (Choices appears to be the trustee in this case). The OP didn't indicate that he received the $120 so I'm guessing the Funeral Home eventually ends up with it. Not only isn't this a nightmare for the OP, I don't see how it is his problem at all. If the IRS has problems with how things were handled, they can go after the trustee (Choices) or the beneficiary (the Funeral Home).

The OP describes a'statement' that doesn't sound like a

1099. If a 1099 is issued, what taxpayer id number was used? If the ID number is for the trust, it is the trustees (Choices) problem. If the ID number is the beneficiary (Funeral home), it is the Funeral homes problem. If the ID number is the SSN of the deceased, the IRS isn't going to spend much time wondering why someone who died in 2012 doesn't file a tax return to report $190 in 2013 income.

If the OP actually received the $120, I would just declare it as income. No matter what, I would quit worrying about it. The problem either isn't the OPs or it is trivial and not worth being concerned about.

I am sympathetic to the distress of the OP. When I handled my father's estate, my ability to dispassionately judge what was worth worrying about and what was not was quite impaired.

thanks for clarifying. I had that "so what - $120" in mind as well.

I didn't explain that very good. I didn't receive any money. The form came addressed to my Dad

The tax form says Grantor trust tax information statement. Name of trust - My Dads name. The federal EIN is the funeral home and the taxpayer SSN is my Dads. Gross Taxable interest 173.20 Fiduciary fees paid 57.44 Total Deductions 57.44 Net Interest 115.76

On the back it has the opening & closing balance and the date each interest payment was made which totals 115.76. They take the 115.76 add the 57.44 fee & call it the Gross Taxable interest then they deduct it and call it net interest..

Thanks, Steve

No, I didn't get any money, on the back of the statement it has an account number and the tax ID number of the fund. Then it has the opening and closing balance with the date of each interest payment which ads up to 115.76. They take the 115.76 add a fiduciary fee of 57.44 and call that my gross taxable interest, then they subtract the same fee and call it net interest.. but what you all are telling me is that its not enough money to worry about. I didn't get any money just this statement although the funeral director said he would send me the interest.

So what. The IRS is not going to be looking for a 1041-QFT. The cost of billing someone for the tax on $120 is more than the cost of the tax. Technically, a funeral trust ends at death. The money belongs to the beneficiary as the grantor is deceased. The beneficiary should report it.

=========Not so fast.

As this was paid out within a month of death, I say it goes to the estate first. There is no immediate distribution to a beneficiary. An estate is open for the 9 months when an estate tax return (form 706) is due, whether it's filed or determined not necessary (unless filed early and the IRS issues a prompt assessment closing letter - which is unlikely as the IRS gets 18 months to do so and we all know they never rush).

As an estate's personal exemption for income tax purposes is $600 and this is less, there's no need to file a 1041 -- AND no need for anyone else to report it.

Part of this might have been taxable to the decedent before his death under the grantor trust rules as it appears what is being reported is an annual total.

We're probably spending way too much time on this. Check the dates. DoD was 12/24/2012. Interest accrued in 2013 and has not been distributed. Beneficiary (OP) should ask the funeral home for the money and just put it on his own tax return.

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you also didn't trim your post.

If the tax info shows your dad's SSN received the $173.20 in interest, just put it on your dad's tax return. If your dad's income was sufficiently low, he does not need to file.

I don't understand why there is any question, now that you have stated it is your dad's SSN.

Way too much time on this.....

Dad is deceased in 2012. There is no Dad tax return for 2013. The grantor trust ended on DoD. It is nuts to ask this person to obtain an EIN for the estate and file 1041s for 2013 and again in 2014 as the money is his. Just include it on his own return and get the funds from the funeral home and be done with it.

If by some crazy reason, the IRS ever decided it was worth pushing paper to account for the interest income attached to a deceased person's SSN and that notice ever found its way to the OP, then the OP can merely respond to the notice with the news that he included the amount on his own tax return as the beneficiary.

We're probably spending way too much time on this. Check the dates. DoD was 12/24/2012. Interest accrued in 2013 and has not been distributed. Beneficiary (OP) should ask the funeral home for the money and just put it on his own tax return.

============ OK, but why should he report it as taxable when it's not taxable to the estate (if reported on form 1041) because the exemption wipes it out? The beneficiary should report zero, and there's no need to file a 1041 where gross income is less than the exemption amount. The issue of whether the decedent should report any amount accrued isn't answered here.

Dads DoD was 12/24/2012, I paid the tax on the interest for 2012 on my Dads final return which I filed 4/15/2013. The Funeral Director handed me a receipt @ the funeral on 12/27/2012 marked paid. Instead of sending the paperwork to the fund so they could pay him, he left it in a folder. Hence the account stayed open through 2013 & was still open when I received the statement. I will get another one next year but it should be 10-20.00 at most. I didn't receive any interest but the funeral director said he would send it to me. The funeral director gets whatever is in the account when he closes it. This is how he gets paid. He messed up, he admitted it, no questions there.. So, I appreciate all the input and the best thing for me to do is nothing. I didn't know that if the trust was part of the estate it was qualified for the 600.00 exemption because the form 1041 instructions lists 2 conditions 1 for estates the other trusts and trusts you have to report any taxable income whereas estates get the 600.00 exempti on. If the IRS does come calling I'll send them the receipt I got marked paid 12/27/2012 and let them deal with the funeral director. Thanks Again, Steve

The tax form says Grantor trust tax information statement. Name of trust - My Dads name. The federal EIN is the funeral home and the taxpayer SSN is my Dads. Gross Taxable interest 173.20 Fiduciary fees paid 57.44 Total Deductions 57.44 Net Interest 115.76

My last reply.....

It appears as though we had a grantor trust that was either a funeral trust or a qualified funeral trust with the OP's dad as the beneficiary. Upon his death, the trust ceases to be a grantor trust within X number of days. Now it becomes an irrevocable trust. It should have been closed out but wasn't. So we have a trust (not an estate) with income. The funds are going to be eventually provided to the son (our OP). So, I was just trying to keep it simple.

Now I notice the OP has posted more info that I am not going to read.

My last reply.....

It appears as though we had a grantor trust that was either a funeral trust or a qualified funeral trust with the OP's dad as the beneficiary. Upon his death, the trust ceases to be a grantor trust within X number of days. Now it becomes an irrevocable trust. It should have been closed out but wasn't. So we have a trust (not an estate) with income. The funds are going to be eventually provided to the son (our OP). So, I was just trying to keep it simple.

Now I notice the OP has posted more info that I am not going to read. =========== I disagree in that the irrevocable trust is part of the estate during the period of estate administration (which would be the at least the first 9 months of 2013). Therefore, the estate exemption is what is important here as the filing threshold. As a grantor trust during the decedent's lifetime, it doesn't necessarily go its own way immediately upon death. Here, it is in the beneficiary's advantage that it hasn't. This is buried somewhere in the TRs for IRC sections 671-679, but I don't remember offhand which TR it is as the last time I looked at such a situation was back in 1997 when preparing a Tax Court brief.