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10346: 1041 - 1099 Income with Backup Withholding

1041 Fiduciary

How does an estate or trust enter backup withholding that appears on a 1099 received by the estate or trust? 

The IRS explains how to handle backup withholding that appears on a 1099 received by an estate or trust:

Except for backup withholding (as explained below), withheld income tax cannot be passed through to beneficiaries on either Schedule K-1 or Form 1041-T.

Backup withholding. If the estate or trust received a 2015 Form 1099 showing federal income tax withheld (that is, backup withholding) on interest income, dividends, or other income, check the box and include the amount withheld on income retained by the estate or trust in the total for line 25e.

Report on Schedule K-1 (Form 1041), box 13, code B, any credit for backup withholding on income distributed to the beneficiary.

1041 Instructions, p. 27

If backup withholding on a 1099 is to be

  • Retained by the estate or trust, enter it on screen 3, line 24e (Drake17 and prior) or 25e (Drake18) "Federal income tax withheld", and mark the box indicating that a 1099 is the source.
  • Distributed to a beneficiary, enter it on screen WKK1, line 13b "Backup withholding". Credit flows according to the beneficiary percentages (subject to modification on screen K1, line 13, using code B Credit for backup withholding).

Do not enter the same backup withholding on both screen 3 and screen WKK1.

Beginning With The 2013 Software:

The 1099 screen has been added to the 1041 return package on the Income tab. Regular Federal, state, and local taxes withheld on Form 1099-R can be entered there, but not backup withholding.

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