Revocable trust?

[Roberts]

I have a prospective client who informed me that he and his wife were required by their previous CPA to file a 1041 for their revocable living trust. Other than an increase in fees, why would that be required? He's never been audited and everyone is 100% sure it's a revocable living trust. The IRS specifically says that since 1981, 1041 forms are not required for these trusts.

Thanks

edit: everyone is still alive for these returns. The grantors, trustees - everyone is still alive so nothing like that has changed.

[Gretel]

If it is indeed a revocable living trust income is reported on 1040. Check out the trust documents.

[Roberts]

If it is indeed a revocable living trust income is reported on 1040. Check out the trust documents.

Oh it is. I've set up investment accounts for the trust and it's written that way. They have a separate irrevocable trust where a 1041 is generated.

If we don't file a 1041 this year and just report the income on their 1040, is there anything I need to fill out? Do I need to do a "final return" for the 1041 with the way they have been doing it all these years?

[jimmcg]

I have a prospective client who informed me that he and his wife were required by their previous CPA to file a 1041 for their revocable living trust. Other than an increase in fees, why would that be required? He's never been audited and everyone is 100% sure it's a revocable living trust. The IRS specifically says that since 1981, 1041 forms are not required for these trusts.

Thanks

edit: everyone is still alive for these returns. The grantors, trustees - everyone is still alive so nothing like that has changed.

Have you yourself actually read the trust agreement and determined that it meets the Code requirements for a revocable living trust agreement.

[Burke]

Oh it is. I've set up investment accounts for the trust and it's written that way. They have a separate irrevocable trust where a 1041 is generated.
If we don't file a 1041 this year and just report the income on their 1040, is there anything I need to fill out? Do I need to do a "final return" for the 1041 with the way they have been doing it all these years?

It can't hurt. Just show all zero's and put everything on the 1040.

[Roberts]

Yes I have a copy of the trust for the investment accounts we hold.

The REALLY REALLY weird part, the CPA did a 1041 for the husbands trust but just rolled the wife's trust info onto the 1040.

[jimmcg]

Yes I have a copy of the trust for the investment accounts we hold.

The REALLY REALLY weird part, the CPA did a 1041 for the husbands trust but just rolled the wife's trust info onto the 1040.

It does sound strange.....Why not just ask the CPA what his logic was?

[Roberts]

It does sound strange.....Why not just ask the CPA what his logic was?

They were contacted and the original CPA retired two years ago. The next CPA just continued without asking any questions. The didn't ask ANY questions and that's how I got hired. They screwed up the retained earnings on the S-corp which were brought in from the company previously being a C-corp. The accountant never asked where the numbers came from so she just "waived" it away as a mistake.