Because of exemptions, deductions, and credits, most individuals do not pay taxes on all of their income. The IRS offers a series of deductions (e.g. deductions for health care, investments, and education expenses) which taxpayers use to reduce their taxable income.

Estate Trust Return:
Who pays the income tax for estates? The estate itself is not responsible for paying income taxes if the assets are distributed to the beneficiaries before it earns income. The beneficiaries are then responsible to pay any tax due on that amount. Each beneficiary will receive Schedule K-1 which tells them the amount and type of income to report on their individual tax returns (1040).

Estate Final Return:
IRS Form 706 from the Internal Revenue Service is used by an executor of a decedent’s estate to calculate estate tax owed according to Chapter 11 of the Internal Revenue Code. The tax covers the entire estate, not just any share received by a beneficiary. Executors also use Form 706 to calculate the generation-skipping transfer tax imposed by Chapter 13.

Trusts are usually classified as simple or complex.
Simple trusts must distribute all of the income earned to its beneficiaries and cannot accrue income. Simple trusts also cannot designate a charity as its beneficiary or distribute its corpus (principal).

Your business structure determines what federal taxes you must pay and how you pay them. Some of the taxes require payment throughout the year, so it’s important to know your tax obligations before the end of your tax year.

If you work with a CPA, you can be sure that your accountant has been pre-screened and is well-trained and experienced. They have to take a test to qualify and periodically renew their certification.

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