The IRS requires the filing of an income tax return for trusts and estates on Form 1041 — formerly known as the fiduciary income tax return. In California an additional California fiduciary income tax return may have to be filed under the following circumstances, giving it a broad reach especially for trusts.
Estates
The executor may have to file a return if the estate meets any of these:
- The decedent was a California resident at the time of death
- Gross income is over $10,000
- Net income is over $1,000
- The estate has income from a California source
- Income is distributed to a beneficiary
Trusts
The trustee may have to file a return if the trust meets any of these:
- The trustee or beneficiary (non-contingent) is a California resident
- The trust has income from a California source
- Income is distributed to a California resident beneficiary.
For details, and when no tax return needs to be filed, see Fiduciary Income 541 Tax Booklet.
California will credit taxes paid in another state if the trust is a resident in both states and taxes are required to be paid to both states. Trust residence is determined differently by different states and may be based on where beneficiaries, grantor or trustee reside. However, a credit can only be claimed if the tax by the other state is levied on the same income and at the same rate. In consequence, additional taxes may need to be paid to California. For more detail: When is an irrevocable trust’s income taxable in California?
