Form 1041-A Checklist for Tax Year 2018
Overview and Purpose
Form 1041-A serves as the information return for trusts claiming charitable deductions under Internal Revenue Code Section 642(c). This form fulfills the mandatory reporting requirements established by section 6034 and related Treasury regulations. The 2018 version, revised in September 2018, reflects significant legislative changes affecting charitable trust reporting obligations.
Key Tax Year 2018 Information
Filing Threshold: $25,000 total income (determines level of detail required)
Filing Deadline: April 15, 2019 (or next business day if weekend or legal holiday)
Extension Available: Form 8868 provides an automatic six-month extension
Filing Address: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027
Penalties: $10 per day (maximum $5,000 per entity) for late filing without reasonable cause
Important 2018 Legislative Update
The Tax Cuts and Jobs Act of 2017 amended Section 641(c)(2), creating a significant change for the 2018 tax year. Electing Small Business Trusts (ESBTs) described in section 641(c) are no longer subject to charitable information reporting requirements under section 6034. These trusts are not required to file Form 1041-A for tax years beginning after December 31, 2017.
Who Must File
The trustee must file Form 1041-A for any trust claiming a charitable or other deduction under section 642(c) during the 2018 calendar year unless an exception applies. Filing is mandatory regardless of the deduction amount if section 642(c) is claimed on Form 1041.
Exceptions to Filing Requirement
Form 1041-A is not required for trusts that are currently required to distribute all income for the tax year to beneficiaries, as determined under Section 643(b) and related regulations.
Charitable trusts described in section 4947(a)(1) do not file Form 1041-A. Split-interest trusts described in section 4947(a)(2) do not file Form 1041-A; these trusts file Form 5227, Split-Interest Trust Information Return, which satisfies section 6034 filing requirements. Electing Small Business Trusts (ESBTs) described in section 641(c) are exempt from Form 1041-A filing requirements for tax years beginning after December 31, 2017.
Step-by-Step Filing Checklist
1. Verify Filing Requirement and Gather Documentation
Confirm that the trust claimed or will claim a charitable deduction under section 642(c) on its 2018 Form 1041. Verify that the trust does not fall within any exception category. Gather all Forms 1099-INT for interest income, Forms 1099-DIV for dividend income, Forms 1099-MISC for miscellaneous income, Schedule K-1s from partnerships or S corporations, documentation of all charitable distributions, including recipient names and complete addresses, copies of the trust instrument demonstrating authority for philanthropic distributions, and accounting records reconciling trust accounting income to taxable income.
2. Determine Required Level of Detail Based on Income
If total income does not exceed $25,000, the trustee may use simplified reporting by skipping lines 1 through 8 of Part I and entering total income directly on line 9. If total income exceeds $25,000, complete all income lines separately: line 1 for interest income, line 2 for ordinary dividends, line 3 for business income or loss with Schedule C or C-EZ attached, line 4 for capital gain or loss with Schedule D attached, line 5 for rents, royalties, partnerships, and other estates and trusts with Schedule E attached, line 6 for farm income or loss with Schedule F attached, line 7 for ordinary gain or loss with Form 4797 attached, and line 8 for other income with type specified.
3. Complete Part I Income and Deductions
Enter all applicable income amounts on lines 1 through 8, or enter total income directly on line 9 if using simplified reporting. Calculate total income on line 9 by combining all income sources. Complete deduction lines: line 10 for interest paid, line 11 for taxes paid, line 12 for charitable deduction with itemization by charitable purpose, including each payee’s name and complete address, line 13 for trustee fees, line 14 for attorney, accountant, and return preparer fees, and line 15 for other deductions with attached schedule if applicable.
4. Complete Part II Distributions of Income Set Aside for Charitable Purposes
Enter, on line 16, the beginning balance of accumulated income set aside in prior tax years under Section 642(c) that remains to be distributed. Complete lines 17a–17e for each distribution made during 2018 from previously set-aside income. For each distribution, provide sufficient detail, including the charitable purpose explicitly described (not merely categories like religious or educational), the complete payee name, the full address, including street address, and the exact dollar amount.
Enter the total of lines 17a through 17e on line 18. Calculate the balance by subtracting line 18 from line 16 and enter it on line 19. Enter on line 20 the income set aside during the current year 2018 for which a section 642(c) deduction was claimed; this amount must match Part I, line 12. Add lines 19 and 20 and enter the carryover total on line 21.
5. Complete Part III Distributions of Principal for Charitable Purposes
Enter, on line 22, the total principal distributed in prior tax years for charitable purposes. Complete lines 23a through 23e for each principal distribution made during 2018. For each distribution from the principal, provide detailed information similar to Part II requirements: describe the charitable purpose specifically, include the complete payee name and address, and state the exact dollar amount. Calculate the total of lines 23a through 23e and enter on line 24. Attach continuation schedules if more than five distributions occurred in either Part II or Part III.
6. Determine Balance Sheet Reporting Requirements
If total income on line 9 does not exceed $25,000, complete only lines 38 (total assets), 42 (total liabilities), and 45 (total net assets) in Part IV. If total income exceeds $25,000, complete all asset lines 25 through 37 and all liability lines 39 through 41 with full detail and required schedules.
7. Complete Part IV Balance Sheets Using a Consistent Accounting Method
Use the same accounting method (cash or accrual) that the trust uses in its regular books and records. Complete both column (a) for beginning-of-year book value and column (b) for end-of-year book value.
For detailed reporting when income exceeds $25,000, complete line 25 for cash in non-interest bearing accounts, line 26 for savings and temporary cash investments maturing in less than one year, line 27 for accounts receivable net of allowance for doubtful accounts, line 28 for notes and loans receivable with required attached schedule, line 29 for inventories for sale or use, line 30 for prepaid expenses and deferred charges, line 31 for investments in U.S. and state government obligations with attached schedule, line 32 for investments in corporate stock with attached schedule, line 33 for investments in corporate bonds with attached schedule, line 34 for investments in land, buildings, and equipment held for investment purposes such as rental properties with attached schedule showing cost or basis, accumulated depreciation, and book value, line 35 for other investments with attached schedule, line 36 for land, buildings, and equipment not held for investment purposes such as trust offices with attached schedule, and line 37 for other assets not reported elsewhere with description.
8. Complete Balance Sheet Liabilities and Verify Totals
Enter on line 39 accounts payable and accrued expenses, including salaries payable, accrued payroll taxes, and interest payable. Enter mortgages and other notes payable on line 40, along with an attached schedule that shows lender information and loan details, similar to the requirements on line 28. Enter on line 41 other liabilities not reported on lines 39 or 40 with a description.
Calculate total liabilities on line 42 by adding lines 39 through 41. Enter the trust principal or corpus on line 43. Enter on line 44 the undistributed income and profits. Calculate total net assets on line 45 by adding lines 43 and 44. Calculate total liabilities and net assets on line 46 by adding lines 42 and 45. Verify that line 46 equals line 38 (total assets).
9. Round All Monetary Amounts and Verify Arithmetic Accuracy
Round all dollar amounts to whole dollars by dropping amounts less than 50 cents and rounding up amounts from 50 to 99 cents. Do not report cents on any line of Form 1041-A. Verify all calculations: Part I total income on line 9 should equal the sum of lines 1 through 8, Part II line 18 should equal the sum of lines 17a through 17e, Part II line 19 should equal line 16 minus line 18.
Part II line 21 should equal line 19 plus line 20, Part III line 24 should equal the sum of lines 23a through 23e, Part IV line 38 should equal the sum of all asset lines, Part IV line 42 should equal the sum of all liability lines, Part IV line 45 should equal line 43 plus line 44, and Part IV line 46 should equal line 42 plus line 45 and should also equal line 38.
10. Provide Complete Charitable Purpose Descriptions and Payee Information
For every charitable distribution or set-aside reported in Part II or Part III, ensure each entry includes the complete name of the charitable organization or specific charitable purpose, the complete street address (not merely city and state), and the exact dollar amount. Descriptions must provide sufficient detail beyond general categories. Instead of specifying religious, charitable, scientific, literary, or educational purposes, specify the actual purpose, such as payments to indigent persons for medical purposes, grants to equip university chemistry laboratories, scholarships for low-income college students in a specific state, or medical research for rare diseases.
Verify charitable organization names match IRS records by consulting IRS Publication 78 or the Tax Exempt Organization Search tool available on IRS.gov. If distributions are made to qualifying organizations, confirm their tax-exempt status and ensure the proper legal name is used.
11. Sign and Date the Return with Proper Preparer Information
The trustee or an officer representing the trustee must sign Form 1041-A in the designated signature area on page 2. The signature is made under penalty of perjury, declaring that the return has been examined and is, to the best of the signer's knowledge and belief, accurate, correct, and complete.
Enter the date the return was actually signed, not the due date. If a paid preparer completed the return, the preparer must sign in the Paid Preparer Use Only section, provide the preparer’s PTIN (Preparer Tax Identification Number), print the preparer’s name, provide the preparer’s firm name and complete address, include the firm’s EIN, check the self-employed box if applicable, and provide a telephone number. If someone prepared the return without charge as a friend or family member, that person may sign, but should not check the self-employed box. If the trustee completed the return personally, leave the Paid Preparer section blank.
12. Assemble and File the Return by the Deadline
Assemble all pages in proper order: page 1 (Part I, Part II, Part III), page 2 (Part IV and signature section), and all required schedules and supporting documentation. Attach all the necessary schedules identified throughout the form including Schedule C or C-EZ for business income, Schedule D for capital gains, Schedule E for rents and royalties, Schedule F for farm income, Form 4797 for ordinary gains, investment schedules for government obligations, corporate stocks and bonds, schedules for land, buildings, and equipment, notes and loans receivable schedule with borrower information, and mortgages and notes payable schedule with lender information.
Ensure the trust’s employer identification number appears on all attached schedules. Mail the completed Form 1041-A to the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027. The return must be postmarked by April 15, 2019, or the next business day if April 15 falls on a weekend or legal holiday.
Extension Procedures
Suppose additional time is needed to complete Form 1041-A, file Form 8868, Application for Automatic Extension of Time To File an Exempt Organization Return. Form 8868 must be filed on or before the original due date of April 15, 2019. The extension is automatic and does not require approval from the IRS. The extension grants an additional six months, extending the filing deadline to October 15, 2019. An extension of time to file does not extend the time to pay any tax due. If filing Form 8868, ensure it is filed promptly, as the extension is not effective if Form 8868 is filed after the original due date.
Record Retention Requirements
Retain copies of the completed Form 1041-A and all supporting documentation for a minimum of seven years, consistent with section 6001 of the Internal Revenue Code. Supporting documentation includes the trust’s accounting records reconciling taxable income to accounting income, charitable contribution receipts from all qualified organizations showing the organization’s name, address, tax-exempt status when applicable, date of contribution, and amount of contribution, trust account statements showing all distributions and set-asides for charitable purposes, the trust instrument (will or trust agreement) demonstrating the trustee’s authority to distribute income for philanthropic purposes, any amendments or codicils affecting charitable distributions during 2018, Forms K-1 from partnerships, S corporations, or other pass-through entities supporting income reported on line 5, and documentation supporting trustee fees, attorney fees, accountant fees, and return preparer fees claimed as deductions on lines 13 and 14.
Amended Return Procedures
To file an amended Form 1041-A, complete the entire return again with all corrected information, not just the changed items. Write “Amended Return” across the top of the amended Form 1041-A. An amended return may be filed at any time to modify or add information reported on a previously filed return for the same period. File the amended return at the same address as the original return. Include an explanation of the changes made and the reasons for the amendments. Attach any new or revised schedules required by the corrections.
Penalties and Compliance
Section 6652(c)(2) imposes separate penalties of $10 per day for each day the return is late, with a maximum cumulative penalty of $5,000 against the trust and $5,000 against the trustee (total possible penalty of $10,000) unless reasonable cause is demonstrated. Reasonable cause requires that the trustee exercise ordinary business care and prudence in attempting to file promptly. Simply forgetting the filing deadline does not constitute reasonable cause for an extension. Reasonable cause determinations are made on a case-by-case basis.
The penalty begins accruing the day after the due date (including extensions) and continues until the return is filed or the maximum penalty is reached. Additional penalties apply for filing false or fraudulent returns and are assessed separately from late filing penalties.
Special Considerations for 2018
Form 1041-A for tax year 2018 is filed on a calendar-year basis only. Trusts using fiscal year accounting for other purposes must still report charitable information on a calendar-year basis when filing Form 1041-A. The trust must report all charitable activities that occurred during calendar year 2018, see regardless of when the trust’s fiscal year ends.
The form captures information about charitable distributions from both income and principal, even though only income distributions qualify for Section 642(c) deductions. Part III reporting of principal distributions is for information purposes and does not create a deduction on Form 1041. Ensure proper coordination between the charitable deduction claimed on Form 1041, line 13, and the amounts reported on Form 1041-A, Part I, line 12, and Part II, line 20, as these amounts must be consistent and reconcilable.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
