What IRS Form 1041-QFT (2020) Is For

Form 1041-QFT is filed by trustees of qualified funeral trusts (QFTs) to report income, deductions, gains, losses, and tax liability. A QFT is a special type of trust created through contracts with funeral providers to pre-fund funeral services, where the trustee has elected QFT tax treatment instead of regular grantor trust rules.

When You'd Use Form 1041-QFT for 2020 (Late or Amended Filing)

A late Form 1041-QFT for 2020 is filed when the trustee misses the April 15, 2021 deadline and receives IRS notices for unfiled returns, unpaid taxes, or unreported income. Trustees also file amended returns to correct income or deductions. Refund claims must be filed within three years of the due date to remain valid.

Key Rules Specific to 2020

• Tax brackets: Updated trust tax rates applied in 2020
  
  
• Net Investment Income Tax (NIIT): 3.8% on undistributed net investment income above thresholds
  
  
• No personal exemptions: Unlike other trusts, QFTs cannot claim them
  
  
• Composite returns: Trustees may file for multiple QFTs but must calculate per-beneficiary separately
  
  
• Form version: Only the 2020 version of Form 1041-QFT should be used
  
  

Step-by-Step (High Level)

• Gather transcripts using Form 4506-T or IRS online services
  
  
• Complete Form 1041-QFT (2020) with proper rates and per-beneficiary allocations
  
  
• Attach schedules such as Schedule D (capital gains) and composite return beneficiary statements
  
  
• Mail completed forms to IRS, Kansas City, MO 64999
  
  
• Keep copies of returns, schedules, and proof of mailing for records
  
  

Common Mistakes and How to Avoid Them

• Missing composite return details: Each beneficiary’s information must be included
  
  
• Using wrong tax rates: Always apply 2020 trust brackets, not current rates
  
  
• Claiming exemptions: QFTs do not receive personal exemptions
  
  
• Overlooking NIIT: Complete Form 8960 if thresholds are met
  
  
• Incorrect signatures: Trustees and preparers must sign correctly
  
  
• Non-qualifying trusts: Verify eligibility; non-QFTs must use Form 1041
  
  

What Happens After You File

The IRS typically processes late 2020 returns within 8–12 weeks, but more complex cases may take longer. You may receive balance due or confirmation notices. Penalties and interest accrue until payment is complete. Installment agreements may be arranged using Form 9465. If adjustments are made, trustees may appeal or seek penalty abatement for reasonable cause.

FAQs

What penalties apply to late-filed 2020 Form 1041-QFT?

Late filing penalties equal 5% of unpaid tax per month, capped at 25%. Late payment penalties are 0.5% per month, also capped at 25%. Interest accrues daily on unpaid balances until fully paid. Filing promptly reduces additional costs, even if full payment cannot be made immediately.

Can I still get a refund from a 2020 QFT return filed late?

Refunds are available if you file by April 15, 2024, which is within the three-year statute of limitations. After that date, refunds for overpaid 2020 taxes are generally forfeited. Trustees should file promptly to preserve any rights to refunds or credits.

Do I need account transcripts before filing a late return?

They are not required, but transcripts help verify prior filings, IRS notices, and any estimated payments. Ordering transcripts ensures accuracy and prevents duplicate reporting. Trustees can request them via Form 4506-T, IRS.gov, or by calling the IRS directly.

Can I e-file a late 2020 Form 1041-QFT?

Electronic filing may not be available for prior year returns like 2020. In most cases, the trustee must file a paper return and mail it to the IRS in Kansas City, MO. Always confirm current e-file availability before attempting electronic submission.

Should I amend state returns if I file a late federal QFT return?

Possibly. Many states conform to federal QFT elections and require corresponding amendments when federal returns are filed late or corrected. Rules vary, so trustees should verify with their state’s tax authority to avoid mismatched records or penalties.

What if I can't pay the full amount owed on a late 2020 return?

File the return anyway to stop late filing penalties from growing. Then request a payment plan using Form 9465 or IRS online options. Short-term or long-term installment agreements are available, with interest and fees applying until the balance is fully paid.

How do I make the QFT election if I never filed the original 2020 return?

The QFT election is normally made with the original timely return. For late elections, trustees may need to request IRS relief through a private letter ruling. Consulting a tax professional is strongly advised to explore late election relief options.