Form 1041-QFT Checklist for Tax Year 2019
Overview and Tax Law Context
Form 1041-QFT is the income tax return for Qualified Funeral Trusts during tax year 2019. This form reflects Tax Cuts and Jobs Act provisions that became effective for taxable years beginning after December 31, 2017. The TCJA modified the trust tax rate schedule to four brackets with rates of 10, 24, 35, and 37 percent and suspended miscellaneous itemized deductions subject to the two percent floor for tax years 2018 through 2025.
QFTs are subject to Net Investment Income Tax under Section 1411 at 3.8 percent on undistributed net investment income exceeding specified thresholds. QFTs are specifically prohibited from claiming personal exemption deductions under Section 685, a restriction unique to this trust type that predates TCJA changes. All QFTs must use calendar year accounting periods exclusively.
Filing Deadline
File Form 1041-QFT by April 15, 2020, for calendar year 2019. When the due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. Trusts operating on short tax years file by the fifteenth day of the fourth month following the close of the short year. Request automatic six-month extensions using Form 7004. Extensions apply only to filing time, not payment deadlines.
Qualified Funeral Trust Eligibility
A trust qualifies as a QFT when it meets the six requirements outlined in Section 685. The trust must be domestic, arising from a contract with a person engaged in the trade or business of providing funeral or burial services or property necessary to provide such services. The sole purpose must be holding, investing, and reinvesting funds to pay exclusively for funeral or burial services or property for designated beneficiaries.
Only individuals receiving funeral services or property upon death can serve as beneficiaries. The only contributions to the trust must be contributions by or for the benefit of these designated beneficiaries. The trustee must have made, or previously made, the election to treat the trust as a QFT. The trust would have been treated as owned by the purchasers of the contracts under grantor trust provisions if the QFT election had not been made, with a sixty-day grace period following an individual’s death.
When a QFT has multiple beneficiaries, each beneficiary’s separate interest under a contract receives treatment as an individual QFT for tax calculation and filing purposes.
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.
Employer Identification Number
Apply for an EIN using Form SS-4 online for immediate issuance, or submit by mail or fax. Write “Applied for” on line 2 if you have not received your EIN by the filing deadline. For composite returns, obtain a separate EIN exclusively for that composite filing, distinct from individual QFT EINs.
General Information
Complete Part I with the trust name exactly as shown on Form SS-4, EIN on line 2, trustee name and title on line 3a, complete address on lines 3b and 3c, and the total number of QFTs included if filing a composite return on line 4. Mark the applicable boxes on line 5 to indicate initial return, amended return, final return, change in fiduciary or fiduciary’s name, or change in fiduciary’s address.
Income Reporting
Interest Income
Report taxable interest on line 1a. Report tax-exempt interest on line 1b without including it in line 1a or in total income. Tax-exempt interest must be disclosed, but it does not contribute to taxable income.
Dividend Income
Report total ordinary dividends on line 2a. Report qualified dividends on line 2b. Qualified dividends include dividends received from domestic corporations or qualified foreign corporations, excluding dividends from corporations exempt from income tax under Section 501 or 521, amounts allowed as deductions under Section 591, and dividends described under Section 404(k). Verify the dividend-paying corporation meets qualified status and that the QFT held the stock for the requisite holding period.
Capital Gains and Losses
Report net capital gain or loss on line 3. Attach Schedule D (Form 1041) for all capital transactions when the QFT has net capital gain and taxable income, or qualified dividends and taxable income, and complete Part V of Schedule D to apply preferential tax rates. Enter the tax from Schedule D line 45 on Form 1041-QFT line 13.
For composite returns, separately identify for each QFT the net short-term capital gain, the net long-term capital gain, the twenty-eight percent rate gain, and the unrecaptured Section 1250 gain in the attached statement.
Other Income
Report other income not included on lines 1a, 2a, or 3 on line 4. List the type and amount of each income item on an attached statement when more than one type exists. Other income may include rental income, partnership distributions, or other miscellaneous income items.
Total Income
Line 5 combines lines 1a, 2a, 3, and 4 to determine total income.
Deductions
Tax-Exempt Income Allocation
Generally, no deduction is allowed for expenses allotted to tax-exempt income. State income taxes and business expenses allotted to tax-exempt interest remain deductible as exceptions to the tax. Expenses directly allocable to tax-exempt income are allocated only to that income. Allocate indirect expenses proportionally between tax-exempt and other income using reasonable methods. Document the allocation methodology used.
Deduction Categories
Line 6 reports taxes paid by the trust, including state and local income taxes and property taxes allocable to trust operations. Line 7 reports trustee fees for services rendered. Line 8 includes attorney, accountant, and return preparer fees.
Line 9 accommodates other deductions not subject to the two percent floor. These are costs incurred specifically because the property is held in trust. Attach a statement listing each type and amount when multiple deductions exist.
Line 10 previously reported miscellaneous itemized deductions subject to the two percent floor. For tax years 2018 through 2025, miscellaneous itemized deductions subject to the two percent floor are suspended and not allowed. Leave line 10 blank or enter zero for 2019.
QFTs cannot claim personal exemption deductions. This prohibition is specific to QFTs under Section 685 and differs from the exemption amounts allowed to most other trusts and estates.
Passive Activity and At-Risk Limitations
Apply Section 469 passive activity loss limitations and at-risk provisions when calculating allowable deductions. These limitations operate independently of the two percent floor suspension and require separate analysis based on the specific circumstances of each QFT.
Total Deductions and Taxable Income
Line 11 totals all deductions by adding lines 6 through 10. Line 12 calculates taxable income by subtracting line 11 from line 5.
Tax Calculation
2019 Tax Rate Schedule
Apply the 2019 tax rate schedule for estates and trusts unless Schedule D capital gains or qualified dividends require different treatment. The schedule includes four brackets.
Ten percent applies to taxable income from zero to $2,600. Twenty-four percent applies to income from $2,601 to $9,300, calculated as $260 plus 24 percent of the excess over $2,600. Thirty-five percent applies to income from $9,301 to $12,750, calculated as $1,868 plus 35 percent of the excess over $9,300. Thirty-seven percent applies to income over $12,750, calculated as $3,075.50 plus 37 percent of the excess over $12,750.
Enter the calculated tax on line 13. If the QFT has net capital gain and taxable income, or qualified dividends and taxable income, complete Schedule D Part V and enter the tax from Schedule D line 45 on line 13 instead of using the rate schedule.
Composite Returns
For composite returns, calculate tax separately for each QFT using either the tax rate schedule or Schedule D as appropriate. Check the composite return box on line 13 and enter the total of all individual QFT tax calculations.
Credits
Line 14 accommodates various tax credits available to estates and trusts. Specify each credit type claimed and attach all required supporting forms. When claiming multiple credits, attach a statement listing the type and amount of each credit. Consult the Instructions for Form 1041 for comprehensive guidance on available credits and confirm which credits are allowable to QFTs.
Line 15 shows the result of subtracting line 14 credits from line 13 tax.
Net Investment Income Tax
QFTs may owe Net Investment Income Tax under Section 1411 at 3.8 percent on the lesser of undistributed net investment income or the excess of adjusted gross income over the threshold amount. For trusts, the threshold equals the dollar amount at which the 37 percent tax bracket begins for the tax year.
Complete Form 8960 to calculate NIIT. Net investment income generally includes interest, dividends, annuities, royalties, rents, and gains from property dispositions, reduced by properly allocable deductions. Enter the NIIT from Form 8960 line 21 on Form 1041-QFT line 16. Attach Form 8960 to the return.
For composite returns, treat each beneficiary’s interest in each QFT as a separate trust when calculating NIIT. Apply the threshold individually to each account, calculate NIIT for each qualifying account, and enter the total on line 16.
Total Tax
Line 17 calculates the total tax by adding lines 15 and 16. If the QFT owes additional taxes beyond regular income tax and NIIT, include these amounts in line 17. Examples include alternative minimum tax calculated on Schedule I (Form 1041), recapture taxes, or other additional taxes. Write the type and amount of additional tax to the left of the line 17 entry space and attach the forms required to calculate these taxes.
Payments
Line 18 reports all payments made toward the 2019 tax liability. Include estimated tax payments made during 2019, tax paid with a request for extension of time to file using Form 7004, and federal income tax withheld, including backup withholding. If the QFT received credit for tax paid on undistributed capital gains, include this amount and attach Copy B of Form 2439.
If you include interest or penalties with your payment, identify and enter these amounts in the bottom margin of Form 1041-QFT. Do not include interest or penalty amounts in the balance of tax due on line 17.
Balance Due or Overpayment
Line 19 calculates the tax due when the payments on line 18 fall short of the total tax on line 17. Pay the tax in full when filing the return. Make checks or money orders payable to “United States Treasury” and write the EIN from line 2 and “2019 Form 1041-QFT” on the payment. Enclose but do not attach the payment with Form 1041-QFT.
Line 20 calculates overpayment when line 18 payments exceed line 17 total tax. Line 21 allocates overpayments. Line 21a directs overpayments to the 2020 estimated tax. Line 21b requests a refund of the overpayment amount.
Required Attachments
Attach Schedule D (Form 1041) whenever the QFT reports capital gains or losses on line 3. Attach Form 8960 when the QFT is subject to Net Investment Income Tax.
For composite returns, attach a comprehensive statement showing for each QFT or separate interest the name of the owner or beneficiary, type and gross amount of each income type, with separate identification of capital gain components, type and amount of each deduction and credit allocable to the QFT, tax and payments made, and termination date if the QFT terminated during the year.
When line 4 includes multiple types of other income, attach a statement listing each type and amount. When line 9 includes multiple deductions, attach a statement itemizing each type and amount. When claiming multiple credits, attach a statement listing each credit type and amount, in addition to the required credit forms.
Attach Copy B of Form 2439 when claiming credit for tax paid on undistributed capital gains on line 18.
Signature Requirements
The trustee or an authorized representative must sign Form 1041-QFT. The signature certifies under penalties of perjury that the return has been examined and that, to the best of the knowledge and belief, it is true, correct, and complete.
Paid preparers must complete all fields in the Paid Preparer Use Only section. Sign the return, enter a Preparer Tax Identification Number issued after September 27, 2010, check the self-employed box if applicable, and provide firm information, including name, EIN, address, and phone number. Provide the trustee with a copy of the completed return, in addition to the copy filed with the IRS.
Trustees can authorize the IRS to discuss the 2019 return with the paid preparer by checking “Yes” in the signature area. This authorization applies only to the individual preparer who signed the return, not to the firm or its employees. The authorization automatically expires on the due date for filing the 2020 return. It allows the preparer to provide missing information, check on return processing and refund status, and respond to certain IRS notices about math errors and offsets. The authorization does not permit the preparer to receive refund checks, bind the QFT to additional tax liability, or otherwise represent the QFT before the IRS.
Filing Location
Consult the IRS Where to File page for Form 1041-QFT to determine the correct mailing address for 2019 returns. Filing addresses may vary based on location and whether payment is included. Designated private delivery services, such as those provided by FedEx and UPS, also meet the timely filing requirements.
Estimated Tax Requirements
QFTs expecting to owe at least $1,000 for 2020 after subtracting withholding and credits must pay estimated income tax. Estimated tax liability is figured for individual QFTs, not for composite returns as a whole. Use Form 1041-ES for detailed calculations and payment vouchers. Trustees who underpaid estimated tax for 2019 may face penalties. Use Form 2210 to calculate any underpayment penalty.
Filing Process
- Verify Qualification and Election Status
Confirm your trust meets all six QFT requirements under Section 685. Document that the trustee made the QFT election by filing Form 1041-QFT by the original due date for the first eligible year or any subsequent year. Verify the election has not been revoked. If filing a composite return for multiple QFTs, document in writing which QFTs are included and prepare to provide detailed information for each. Check the appropriate box on line 5 for “initial,” “amended,” or “final” return status. - Obtain EIN and Complete General Information
Apply for an EIN using Form SS-4 if needed. For composite returns, obtain a separate EIN exclusively for that filing, not reusing prior Form 1041 EINs. Enter the trust name exactly as shown on Form SS-4, EIN, trustee information, address, and number of QFTs included if filing a composite return. - Gather Income Documentation
Collect Forms 1099-INT for interest, Forms 1099-DIV for dividends, Forms 1099-B or broker statements for capital transactions, Form 2439 if applicable, and any other income documentation. Organize documents by income type for accurate reporting. Distinguish tax-exempt interest from taxable interest. Verify qualified dividend eligibility, including holding period requirements. - Document Deductible Expenses
Collect invoices and statements for taxes, trustee fees, attorney fees, accountant fees, return preparer fees, and other allowable deductions. For any tax-exempt interest income, prepare to allocate expenses between tax-exempt and other income. Document the allocation methodology. Identify which costs would not have been incurred if the property were not held in trust. Confirm no personal exemption deduction is claimed. - Apply Deduction Limitations
Verify that miscellaneous itemized deductions subject to the two percent floor are not claimed, as these are suspended for 2018 through 2025. Report taxes on line 6, trustee fees on line 7, attorney and accountant fees on line 8, and other deductions on line 9. These administrative costs, which would not exist absent the trust structure, generally remain deductible despite the suspension of the two percent floor deductions. Leave line 10 blank or enter zero. - Complete Schedule D for Capital Transactions
Prepare Schedule D (Form 1041) for all capital gains and losses. Separately identify net short-term capital gain, net long-term capital gain, twenty-eight percent rate gain, and unrecaptured Section 1250 gain. Transfer net capital gain or loss to line 3. If preferential rates apply to capital gains or qualified dividends, complete Schedule D Part V. - Report Income and Calculate Taxable Income
Report taxable interest on line 1a and tax-exempt interest on line 1b. Report ordinary dividends on line 2a and qualified dividends on line 2b. Report net capital gain or loss on line 3. List other income on line 4 with an attached statement for multiple items. Combine lines 1a, 2a, 3, and 4 to determine total income on line 5. Total deductions on line 11 and calculate taxable income on line 12 by subtracting line 11 from line 5. - Calculate Tax Liability
Apply the 2019 tax rate schedule to determine tax on line 13, unless Schedule D Part V applies for capital gains or qualified dividends. For Schedule D situations, enter the tax from Schedule D line 45 on line 13. For composite returns, calculate tax separately for each QFT and enter the total with the composite return box checked. - Calculate NIIT and Total Tax
Complete Form 8960 if the QFT has undistributed net investment income or adjusted gross income exceeding the threshold. For composite returns, calculate NIIT separately for each beneficiary’s interest as a separate trust. Transfer NIIT from Form 8960 line 21 to line 16. Specify credits on line 14, along with the supporting forms attached. Calculate line 15 by subtracting line 14 from line 13. Calculate total tax on line 17 by adding line 15 and line 16, including any additional taxes. - Report Payments and File Return
Report all 2019 payments on line 18. Calculate tax due on line 19 or overpayment on line 20. Allocate any overpayment on line 21. Sign and date the return. Ensure paid preparer compliance if applicable. For composite returns, attach the required statement with complete details for each QFT, including the owner or beneficiary’s name, income types and amounts with capital gain components separated, deductions and credits, tax and payments, and termination dates. Enclose payment if the balance is due. File by April 15, 2020, or submit Form 7004 for an extension.
This checklist provides comprehensive guidance for accurately preparing Form 1041-QFT returns for tax year 2019, incorporating changes under the Tax Cuts and Jobs Act while ensuring compliance with IRS requirements and properly applying available deductions within statutory limitations.
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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.
