Form 1041-QFT Filing Checklist for Tax Year 2020
Overview and Applicability
Form 1041-QFT is the income tax return for Qualified Funeral Trusts under IRC Section 685.
For 2020, the trust tax rates are 10% on taxable income from $0 to $2,600; 24% on income from
$2,601 to $9,450; 35% on income from $9,451 to $12,950; and 37% on income over $12,950.
The Tax Cuts and Jobs Act provisions apply for 2020, including suspension of the personal
exemption deduction and elimination of miscellaneous itemized deductions subject to the two
percent floor. Economic Impact Payments do not apply to trusts filing Form 1041-QFT, as trusts
are ineligible for stimulus payments, so no reconciliation is required.
Qualified Funeral Trust Requirements
A Qualified Funeral Trust is a domestic trust established exclusively to hold funds for funeral or
burial services for designated beneficiaries. The trust must be domestic, have a funeral/burial as
its sole purpose, name specific beneficiaries, receive contributions by or for those beneficiaries,
make a valid election, and meet the requirements of a grantor trust.
All QFTs must use a calendar year for accounting. QFTs do not receive a personal exemption
deduction, as TCJA suspended this for all taxpayers for 2018 through 2025. Miscellaneous
itemized deductions subject to the two percent floor are also suspended during this period.
Filing Requirements and Employer Identification Number
For a single QFT, use that trust’s EIN. For composite returns covering multiple QFTs with the
same trustee, obtain a separate EIN exclusively for the composite filing. This composite EIN is
distinct from the individual EINs of each trust included in this composite. If the EIN has not
arrived by the filing deadline, write “Applied for” in the EIN space. Apply online at IRS.gov or
submit Form SS-4.
Income Documentation and Reporting
Gather all 2020 income records: Form 1099-INT for interest, Form 1099-DIV for dividends and
capital gain distributions, and brokerage statements for capital gains and losses. Separate
qualified dividends from ordinary dividends for preferential tax rate eligibility.
The accounting method chosen by the trustee is applied consistently across the return, unless
specific line instructions indicate otherwise. QFTs are domestic trusts restricted to funeral and
burial funds and do not typically engage in complex international transactions.
Taxable Income Calculation
Calculate gross income by totaling interest, dividends, and capital gains. Deduct allowable
expenses: taxes, trustee fees, attorney fees, accountant fees, preparer fees, and other
deductions. Expenses directly allotted for tax-exempt interest are generally not deductible.
However, state income taxes remain deductible regardless of income source.
Subtract total deductions from gross income to arrive at taxable income. No personal exemption
deduction is available for 2020.
Capital Gains and Qualified Dividends
If the QFT has capital gains or losses during 2020, complete Schedule D (Form 1041). When
net capital gain or qualified dividends are present, use the Schedule D Tax Worksheet in the
Schedule D instructions to calculate tax with preferential rates. Enter the tax from Schedule D
line 19 on the tax line of Form 1041-QFT.
For composite returns, separately identify the net short-term capital gain, the net long-term
capital gain, the 28% rate gain, and the unrecaptured section 1250 gain. Treat each
beneficiary's interest as a separate trust.
Tax Calculation
Apply the 2020 Tax Rate Schedule: 10% on income from $0 to $2,600; 24% from $2,601 to
$9,450; 35% from $9,451 to $12,950; and 37% over $12,950.
If the trust has net capital gain or qualified dividends, complete Schedule D and use the
Schedule D Tax Worksheet. Enter the tax from Schedule D, line 19, instead of using the
standard rate schedule. For composite returns, calculate tax separately for each QFT and enter
the combined total.
Credits and Net Investment Income Tax
Specify each credit claimed and attach the required forms. Do not claim credits prohibited to
QFTs, such as those for business activities, adoption, education, or child tax provisions. Attach
Form 2439 for undistributed capital gains credits.
Determine if the QFT is subject to the 3.8% Net Investment Income Tax under Section 1411 for
tax years beginning January 1, 2013, onward. Complete Form 8960 to calculate this tax. For
composite returns, treat each beneficiary interest as a separate trust for NIIT calculations. Enter
the Form 8960 line 21 result on the NIIT line of Form 1041-QFT.
Payments and Credits
Report all 2020 payments: estimated tax installments, Form 7004 extension payments, backup
withholding, and undistributed capital gains credits. Attach Form 2439 Copy B for capital gains
credits.
Form 7004 extends filing time but not payment time. Ensure that estimated tax is paid by the
original due date to avoid interest and penalties.
Composite Return Statement
For composite returns covering two or more QFTs, attach a statement listing for each trust
beneficiary name, gross amount, and type of income (including net short-term capital gain,
long-term capital gain, 28% rate gain, and unrecaptured section 1250 gain), deductions and
credits allocated, tax and payments, and termination date if applicable.
Enter totals for all QFTs on Part II lines. Treat each beneficiary interest as a separate trust for
NIIT purposes.
Signature and Assembly
The trustee or authorized representative must sign and date the return under penalties of
perjury. If a paid preparer completes the return, they must sign, enter their PTIN, provide firm
information, and submit a copy to the trustee. Select the authorization box only if the trustee
authorizes discussion with the IRS by the preparer.
Payment Methods
The IRS recommends using electronic payment methods, including IRS Direct Pay, Electronic
Federal Tax Payment System, or a credit/debit card through approved processors. These
methods are faster and more secure. If paying by check, make it payable to “United States
Treasury,” write the EIN and “2020 Form 1041-QFT” on the check, and mail it with the return
without stapling.
Filing Deadline and Mailing Address
Form 1041-QFT for 2020 is due April 15, 2021. Suppose this falls on a weekend or legal
holiday; file by the next business day. Verify the deadline at IRS.gov for any special relief. The
mailing address depends on the inclusion of Paymis. Without payment: Internal Revenue
Service, Kansas City, MO 64999. With payment: Internal Revenue Service, P.O. Box 931100,
Louisville, KY 40293-1100.
Always verify at IRS.gov before mailing. If using a private delivery service, verify it is on the
IRS-approved list and obtain proof of mailing. Private services cannot deliver to P.O. boxes.
Step-by-Step Process Summary
Step 1: Verify QFT status and obtain or confirm EIN.
Step 2: Gather income documents, including Forms 1099-INT, 1099-DIV, and capital gain
records.
Step 3: Calculate taxable income by totaling gross income, identifying allowable deductions,
applying expense allocation rules, and subtracting deductions.
Step 4: Complete Schedule D for capital gains and losses when applicable.
Step 5: Calculate tax using the rate schedule or Schedule D Tax Worksheet for capital gains
and qualified dividends.
Step 6: Identify allowable credits and attach required forms.
Step 7: Calculate Net Investment Income Tax, if applicable, using Form 8960.
Step 8: Document all payments, including estimated tax, extension payments, and backup
withholding.
Step 9: Prepare a composite return statement if filing for multiple trusts.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Obtain the required signatures, select a payment method, verify the mailing address,
and file by the deadline.
This checklist ensures accurate completion of Form 1041-QFT for tax year 2020, incorporating
all applicable provisions for Qualified Funeral Trusts.If you’re missing tax documents or want to ensure the numbers you enter match IRS records,
we can help.
