Tax Extensions for Trusts and Estates

If you are filing for an estate or trust and you need more time to prepare your return, you can file Form 7004 for a tax extension.

Note that the rules for these types of extensions have changed in recent years. With separate bills in the House and the Senate, the timelines for certain business extensions were changed with the passing of the Tax Return Due Date Simplification and Modernization Act, 2011. This act simplified and clarified an ongoing issue for estates, trusts, and some corporations regarding tax extensions.

Previous Extension Issues

Prior to the 2011 legislative change, many taxpayers associated with these types of organizations were in a catch-22 position. The 6-month individual extension would often coincide with the business extension deadline, which created a burden for individuals who relied on the information from Schedule K-1 (and other similar statements) to prepare their personal returns. This caused many individuals who received pass-through income from estates, trusts, partnerships, or corporations to be late on their tax returns.

IRS Commissioner Doug Shulman said, “We are eliminating the same-day deadline for these returns, which causes needless hardship and puts the individual taxpayer in an awkward position. We want to correct this timing issue to ensure that all taxpayers have the information they need to file timely and stay in compliance with the law.”

It was originally suggested that the IRS simply extend individual tax extensions by another month. But unfortunately, tax extensions are regulated by legislative authority and only an act of Congress can change the rules. A major advocacy body for trusts and estates suggested (to the IRS and the House and Senate committees overseeing the legislation) a 5-month extension instead. This is what was passed in the Act of 2011.

Trusts and Estates

A trust is a specific financial vehicle that helps an individual solve an issue surrounding their property or assets. Trusts are set up for many different reasons, and they produce many different types of results. Some trusts have only one beneficiary, while others can have hundreds or thousands of beneficiaries. The most famous trust is the “Bill and Melinda Gates Trust” that actually funds their Foundation. Other trusts are often set up by wealthy individuals to manage the passage of their wealth to heirs, charities, or other beneficiaries. A trust requires a start-up grant, which many believe should be more than 5 million dollars.

Estates, on the other hand, are the legal and financial result of all the property, debt, and/or assets upon a person’s death. The term “Gross Estate” refers to the major composition of an estate and includes real value assets (such as property, investments, and bank accounts). “Residue Estate” represents property of personal value to a person, which can include books, jewelry, tools, and furnishings. “Estate Debt” refers to all the credit instruments that still owe a balance.

5 or 6 Month Tax Extensions

IRS Tax Form 7004 is the Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.

Estates and trusts should use Form 7004 to request a tax extension with the IRS. Most estates and trusts are allowed a 5-month extension. Bankruptcy estates are allowed a 6-month extension.

If your original filing deadline is April 15, a 5-month tax extension will give you until September 15 to file your return. If your original filing deadline is April 15 and you obtain a 6-month extension, your extended filing due date is October 15.

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