IRS Form 1041-QFT (2019): Qualified Funeral Trust Return

What IRS Form 1041-QFT (2019) Is For

IRS Form 1041-QFT (2019) is the income tax return used to report income, deductions, and tax liability for a Qualified Funeral Trust (QFT). A QFT is a type of trust established under federal law to hold and invest funds for funeral expenses. Trustees must file this income tax form when the trust’s gross income reaches $600 or more during the tax year.

For tax purposes, the Internal Revenue Service (IRS) treats a Qualified Funeral Trust as a separate taxable entity. This means each trust files its own income tax return, reporting all investment income, capital gains, dividends, and related expenses. The trustee is responsible for ensuring that the form is prepared correctly, that taxes are paid, and that compliance requirements are met under the Internal Revenue Code.

To locate additional schedules or supporting documents, trustees can refer to the IRS Form Help Center for quick access to the forms needed for a complete filing.

When You’d Use Form 1041-QFT for 2019 (Late or Amended Filing)

A trustee would file a late or amended IRS Form 1041-QFT for 2019 if the original filing deadline of April 15, 2020, were missed. Late filings are often prompted by IRS notices concerning unfiled returns, discrepancies in income, or outstanding balance due amounts. Trustees may also amend the return to correct errors, adjust deductions, or include income that was not previously reported.

Refund claims for 2019 are generally time-barred under the three-year statute of limitations, except for cases that qualify under COVID-19 relief extensions. Trustees should clearly report all changes and maintain complete records for each amended return, including supporting schedules, for audit or review purposes. Before completing the return, trustees should review an IRS account transcript to verify income, withholding, and any previously posted payments for the 2019 tax year.

Key Rules Specific to 2019

Tax rules for 2019 apply to Qualified Funeral Trusts under section 1(e) of the Internal Revenue Code. These include income tax brackets, thresholds for capital gains, and additional tax considerations related to investment income and Net Investment Income Tax.

• Tax Brackets: The tax brackets are 10% up to $2,600; 24% from $2,600 to $9,300; 35% from $9,300 to $12,750, and 37% for amounts exceeding $12,750.
  
  
• Capital Gains Rates: The rates are 0% on the first $2,650; 15% on the amount from $2,650 to $12,950; and 20% on amounts above $12,950.
  
  
• Net Investment Income Tax: The 3.8% Net Investment Income Tax applies when a trust’s undistributed net investment income exceeds the threshold tied to adjusted gross income (AGI).
  
  
• Modified Adjusted Gross Income: The Modified AGI includes additional adjustments, such as certain deductions and income exclusions. Trustees must determine whether the trust’s investment income is subject to the additional 3.8% tax.
  
  
• Global Intangible Low-Taxed Income (GILTI): This applies if a trust holds foreign financial instruments or corporate shares.
  
  
• Composite Returns: Trustees may file composite returns, but each beneficiary’s portion of income, deductions, and capital gains must be calculated separately.

The IRS published these tax rates and thresholds for the 2019 tax year, and they remain the reference for late or amended filings. Trustees who cannot pay the full amount due may apply for an IRS payment plan to spread the remaining balance over monthly installments.

Step-by-Step (High Level)

• Gather IRS Transcripts: Trustees should request transcripts using Form 4506-T, call the IRS helpline at 800-908-9946, or access their IRS account online. The locked padlock icon confirms a secure session.
  
  
• Complete the Form Correctly: Trustees must accurately report all income, dividends, capital gains, and deductions to calculate adjusted gross income and taxable income.
  
  
• Attach Required Schedules: Trustees should attach Schedule D for capital gains and Form 8960 if the trust is subject to Net Investment Income Tax.
  
  
• Mail to the Correct Address: The completed return must be mailed to the Internal Revenue Service, Kansas City, MO 64999. Trustees should use certified mail for proof of timely filing.
  
  
• Maintain Records: Trustees should retain copies of all filed forms, correspondence, and supporting schedules for a minimum of three years after the end of each tax year.

Each of these steps helps ensure that the income tax return is filed correctly and that the trustee fulfills all obligations under federal tax law.

Common Mistakes and How to Avoid Them

• Missing the QFT Election: Trustees must make the Qualified Funeral Trust election in the first eligible year. Missing this election can affect the trust’s qualification status.
  
  
• Incorrect Beneficiary Reporting: Trustees must report each beneficiary’s portion of income, deductions, and capital gains separately.
  
  
• Ignoring Estimated Tax Requirements: Trustees must pay estimated tax if they expect to owe $1,000 or more in income tax for the year.
  
  
• Omitting Net Investment Income Tax: Trustees must complete Form 8960 when the trust’s net investment income exceeds the applicable threshold.
• Confusing return types: File required trust returns separately, and do not substitute a composite return for an individual trust filing.
• Claiming ineligible deductions: Apply only the deductions allowed for QFTs and exclude personal exemptions and non-funeral expenses.

Trustees should consult the IRS instructions and verify all information included on the return before submission. If penalties apply for late filing or underpayment, trustees may qualify for penalty abatement when they can show reasonable cause or a first-time relief basis.

What Happens After You File

The IRS generally processes Form 1041-QFT returns within 12 to 16 weeks. Late-filed or amended returns may take longer to process, depending on the type of issue and the amount of information provided. Trustees may receive notices about corrections, missing data, or unpaid balances.

If the trust owes tax, payment should be made promptly to reduce interest and penalties. Trustees can apply for an installment agreement using Form 9465 or request penalty abatement if they have reasonable cause. Appeals are available if disputes arise. If the trust owes a balance, failure to respond may trigger the IRS collection process, which can escalate through a series of notices and enforcement actions.

Trustees should also verify whether a state trust tax return is required to be filed. Many states mirror federal treatment of Qualified Funeral Trusts, meaning an amended federal return may require a corresponding state amendment. 

FAQs

How do I file IRS Form 1041-QFT (2019) if my trust had a gross income over $600?

You must file IRS Form 1041-QFT (2019) if the trust’s gross income exceeded $600. The trustee should complete all sections, report investment income and capital gains, and mail the income tax return to the IRS at the address in Kansas City.

Does my trust owe the Net Investment Income Tax?

A Qualified Funeral Trust owes the 3.8% Net Investment Income Tax if undistributed net investment income exceeds the adjusted gross income threshold. The trustee must calculate and report it on Form 8960.

How does modified adjusted gross income affect the 2019 return?

Modified adjusted gross income (MAGI) determines whether the Net Investment Income Tax applies. It includes adjustments for deductions and excluded income items that affect the amount of tax the trust is required to pay.

What investment income and capital gains must be reported?

All taxable investment income, including dividends, interest, and capital gains, must be included on the Form 1041-QFT. Trustees should ensure that sales of financial instruments or other assets are reported accurately to reflect actual taxable income.

Is adjusted gross income the same as total income on the income tax return?

No, adjusted gross income (AGI) is total income minus allowable deductions. It serves as the basis for calculating the trust’s taxable income and determining whether additional taxes, such as the Net Investment Income Tax, apply.

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