It’s Tax Season, and Timing Is Everything This Year

Everyone knows by now that the IRS has extended the filing deadlines for 2020 federal income tax returns for individual taxpayers; the normal deadline of April 15 has been extended to May 17, giving all of us an extra month. But less widely known is that the federal tax filing deadline for trust tax returns has not been extended.

In the world of planned giving, and specifically for life-income gifts, this means that the tax returns for charitable remainder annuity trusts (CRATs), charitable remainder unitrusts (CRUTs), and pooled income funds (PIFs) are still due on April 15. In a regular year, the trusts have the same filing deadlines as individuals. Since the Form K-1s are produced as part of the trust tax returns, this means that a trustee for a CRT or PIF can send out the K-1s as late as April 15. Given that there is no guarantee they will receive their K-1s by that date, many trust beneficiaries have become accustomed to filing extensions each year for their personal income tax returns. This is the only way to guarantee that their returns will not be penalized for being late.

Timing is everything, and this year, the 2020 tax returns for trusts must be filed by the standard deadline of April 15. This means that the K-1s are required to be on their way to the beneficiaries by that date, which means that the beneficiaries will receive them in plenty of time to prepare their own income tax returns. Would that it could be that way every year!