Form 1041--QFT U.S. Income Tax Return for Qualified Funeral Trusts

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Instructions for Form
1041-QFT

Department of the Treasury
Internal Revenue Service

(Rev. December 2023)

U.S. Income Tax Return for Qualified Funeral Trusts

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November 16, 2023
General Instructions

Section references are to the Internal Revenue Code.

What’s New

Tax rate schedule for trusts and estates. The tax rates
have changed for 2023. See Line 12—Tax, later.

Future Developments

For the latest information about developments related to
Form 1041-QFT and its instructions, such as legislation
enacted after they were published, go to www.irs.gov/
Form1041QFT.

Reminders

Global intangible low-taxed income.The Tax Cuts and
Jobs Act of 2017 (TCJA) (P.L. 115-97) requires a U.S.
shareholder of any controlled foreign corporation to include in
gross income its global intangible low-taxed income (GILTI).
For more information, see the instructions for line 4, Other
Income, later.
Miscellaneous itemized deductions subject to the 2%
floor.Expenses that qualify as miscellaneous itemized
deductions subject to the 2% floor are no longer deductible.
Net investment income tax (NIIT). Is a 3.8% tax on the
lesser of an estate’s or trust’s undistributed net investment
income or the excess of the estate’s or trust’s adjusted gross
income over a specified threshold amount. NIIT may need to
be included when figuring estimated tax. In addition, there
are special rules when figuring NIIT for a composite return.
See Composite Return, later.

Purpose of Form

The trustee of a trust that has elected to be taxed as a
qualified funeral trust (QFT) files Form 1041-QFT to report
the income, deductions, gains, losses, and tax liability of the
QFT. The trustee can use the form to report information for a
single QFT or for multiple QFTs having the same trustee. If
filing Form 1041-QFT for multiple QFTs, please see the rules
discussed under Composite Return, later.
Pre-need funeral trusts that don’t qualify as QFTs should
see the Instructions for Form 1041, U.S. Income Tax Return
for Estates and Trusts, for their filing requirements.

Qualified Funeral Trust

A QFT is a domestic trust that meets all of the following
requirements.
• The trust arose as a result of a contract with a person
engaged in the trade or business of providing funeral or burial
services or property to provide such services.
• The sole purpose of the trust is to hold, invest, and reinvest
funds in the trust and to use those funds solely to pay for
funeral or burial services or property to provide such services
for the benefit of the beneficiaries of the trust.
Oct 10, 2023

• The only beneficiaries of the trust are individuals for whom
such services or property are to be provided at their death
under the contracts described above.
• The only contributions to the trust are contributions by or
for such beneficiaries’ benefit.
• The trustee makes or previously had made the election to
treat the trust as a QFT.
• The trust would have been treated as owned by the
purchasers of the contracts under the grantor trust provisions
of the Code if the QFT election hadn’t been made.
Note. A trust that isn’t treated as owned by the purchaser
solely because of the death of an individual will be treated as
meeting this requirement during the 60-day period beginning
on the date of that individual’s death.
If a QFT has multiple beneficiaries, each beneficiary’s
separate interest under a contract is treated as a separate
QFT for the purpose of figuring the tax and filing this return.
Each beneficiary’s share of the trust’s income is determined
in accordance with the beneficiary’s interest in the trust. A
beneficiary’s interest in a trust may be determined under any
reasonable method.
Whenever these instructions refer to a trust or QFT, it
includes such separate interests that are treated as separate
QFTs.

Making the Election

The trustee makes the election to treat a trust as a QFT by
filing Form 1041-QFT for the trust by the due date (including
extensions).

You may elect QFT status for a trust’s first eligible year or
for any subsequent year. Once made, the election can’t be
revoked without the consent of the IRS.

Composite Return

A trustee may file a single, composite Form 1041-QFT for
some or all QFTs of which he or she is the trustee, including
QFTs that had a short tax year.

You must attach a statement to a composite Form
1041-QFT that includes the following information for each
QFT (or separate interest treated as a separate QFT).
• The name of the owner or the beneficiary. If you list the
name of the owner and that trust has more than one
beneficiary, you must separate the trust into shares held by
the separate beneficiaries.
• The type and gross amount of each type of income earned
by the QFT for the tax year. For capital gains, identify
separately the amount of (a) net short-term capital gain, (b)
net long-term capital gain, (c) 28% rate gain, and (d)
unrecaptured section 1250 gain.
• The type and amount of each deduction and credit
allocable to the QFT.
• The tax and payments made for each QFT.
• The termination date for each QFT that was terminated
during the year.

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Note. When calculating NIIT for a composite return, treat
each beneficiary’s interest in each QFT (within the meaning
of section 685) as a separate trust.

Paid Preparer Authorization
If the trustee wants to allow the IRS to discuss the QFT’s
2022 tax return with the paid preparer who signed it, check
the “Yes” box in the signature area of the return. This
authorization applies only to the individual whose signature
appears in the Paid Preparer Use Only section of the QFT’s
return. It doesn’t apply to the firm, if any, shown in that
section.

When To File

File Form 1041-QFT by April 15, 2023. The due date for a
composite return is also April 15, 2023, even if the return
includes QFTs that terminated during the year. If you are filing
for a short year, file Form 1041-QFT by the 15th day of the
4th month following the close of the short year. If the due date
falls on a Saturday, Sunday, or a legal holiday, file by the next
business day.

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If the “Yes” box is checked, the trustee is authorizing the
IRS to call the paid preparer to answer any questions that
may arise during the processing of the QFT’s return. The
trustee is also authorizing the paid preparer to:
• Give the IRS any information that’s missing from the QFT’s
return;
• Call the IRS for information about the processing of the
QFT’s return or the status of its refund or payment(s); and
• Respond to certain IRS notices that the trustee has shared
with the preparer about math errors, offsets, and return
preparation.

Private Delivery Services (PDSs)

You can use certain PDSs designated by the IRS to meet the
“timely mailing as timely filing” rule for tax returns. Go to
www.irs.gov/PDS for the current list of designated services.
The PDSs can tell you how to get written proof of the
mailing date.

The trustee isn’t authorizing the paid preparer to receive
any refund check, bind the QFT to anything (including any
additional tax liability), or otherwise represent the QFT before
the IRS.

For the IRS mailing address to use if you’re using a PDS,
go towww.irs.gov/PDSStreetAddresses .

!

CAUTION

PDSs can’t deliver items to P.O. boxes. You must use
the U.S. Postal Service to mail any item to an IRS
P.O. box address.

The authorization will automatically end no later than the
due date (without regard to extensions) for filing the QFT’s
2022 tax return. If the trustee wants to expand the paid
preparer’s authorization or revoke the authorization before it
ends, see Pub. 947, Practice Before the IRS and Power of
Attorney.

Extension of Time To File

Use Form 7004, Application for Automatic Extension of Time
To File Certain Business Income Tax, Information, and Other
Returns, to get an extension of time to file. An extension of
time to file a return doesn’t extend the time to pay the tax.

Accounting Methods

Figure taxable income using the method of accounting
regularly used in keeping the QFT’s books and records.
Generally, permissible methods include the cash method, the
accrual method, or any other method authorized by the
Internal Revenue Code. In all cases, the method used must
clearly reflect income.

Where To File

File Form 1041-QFT at the following address.
Department of Treasury
Internal Revenue Service
Kansas City, MO 64999

Generally, the QFT may change its accounting method (for
income as a whole or for any material item) only by getting
consent on Form 3115, Application for Change in Accounting
Method. For more information, see Pub. 538, Accounting
Periods and Methods

Who Must Sign
Trustee
The trustee, or an authorized representative, must sign Form
1041-QFT.

Accounting Period

All QFTs must use a calendar year as their accounting
period.

Paid Preparer

Rounding Off to Whole Dollars

Generally, anyone who is paid to prepare a tax return must
sign the return and fill in the other blanks in the Paid Preparer
Use Only area of the return. The person required to sign the
return must:
• Complete the required preparer information,
• Sign it in the space provided for the preparer’s signature,
and
• Give you a copy of the return in addition to the copy to be
filed with the IRS.

You must round off cents to whole dollars on your return and
statements. If you do round to whole dollars, you must round
all amounts.

Estimated Tax

Generally, a QFT must pay estimated income tax for 2023 if it
expects to owe, after subtracting withholding and credits, at
least $1,000 in tax. Estimated tax liability is figured for the
individual QFT, and not for a composite return taken as a
whole. For details and exceptions, see Form 1041-ES,
Estimated Income Tax for Estates and Trusts.

Anyone who is paid to prepare the trust’s return must enter
their PTIN in the Paid Preparer Use Onlysection. The PTIN
entered must have been issued after September 27, 2010.
For information, see Form W-12, IRS Paid Preparer Tax
Identification Number (PTIN) Application and Renewal.
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Instructions for Form 1041-QFT (Rev. 12-2023)

Specific Instructions

Interest and Penalties
Interest

Part I – General Information
Line 1 – Name of Trust

Interest is charged on taxes not paid by the due date, even if
an extension of time to file is granted. Interest is also charged
on the failure-to-pay penalty, failure-to-file penalty, the
accuracy-related penalty, and the fraud penalty. The interest
charge is figured at a rate determined under section 6621.

Copy the exact name from the Form SS-4, Application for
Employer Identification Number, used to apply for the EIN
you are using to file Form 1041-QFT.

Late Filing of Return

Line 2 – Employer Identification Number (EIN)

Section 6651 provides for penalties for late filing unless there
is a reasonable cause for the delay. The law also provides for
penalties for willful attempts to evade payment of tax. The
penalty won't be imposed if you can show that the failure to
file on time is due to reasonable cause and not due to willful
neglect.

If the QFT isn’t filing as part of a composite return, use the
EIN of the QFT. If the QFT doesn’t have an EIN, it must apply
for one. Every trustee that elects to file a composite return
must apply for an EIN to be used only for filing Form
1041-QFT. A trustee must use a separate EIN for every Form
1041-QFT it files.

If you receive a notice about penalty and interest after you
file this return, send us an explanation, and we will determine
if you meet reasonable-cause criteria. Don’t attach an
explanation when you file Form 1041-QFT. For more
information about penalties for late filing, see Late Filing of
Returnin the Instructions for Form 1041.

A QFT without an EIN can apply for one in the following
ways.
• Online—A QFT can receive an EIN by Internet and use it
immediately to file a return. Go to the IRS website at
www.irs.gov/EIN and click on “Apply for an EIN Online.”
• By mail or fax—Send in a completed Form SS-4. Form
SS-4 can be obtained online at www.irs.gov/OrderForms.

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Late Payment of Tax

Line 3 – Address

Generally, the penalty for not paying the tax when due is1/2 of
1% of the unpaid amount for each month or part of a month
that it remains unpaid. The maximum penalty is 25% of the
unpaid amount. The penalty applies to any unpaid tax on the
return. Any penalty is in addition to interest charges on late
payments.

Include the suite, room, or other unit number after the street
address. If the post office doesn’t deliver mail to the street
address and you have a P.O. box, show the box number
instead of the street address.

If you want a third party (such as an accountant or an
attorney) to receive mail for the QFT, enter “C/O” on the street
address line, followed by the third party’s name and street
address or P.O. box.

Underpaid Estimate Tax
If the trustee underpaid estimated tax, use Form 2210,
Underpayment of Estimated Tax by Individuals, Estates, and
Trusts, to figure any penalty.

If you change your address (including a new “in care of”
name and address) after filing Form 1041-QFT, use Form
8822-B, Change of Address or Responsible Party —
Business, to notify the IRS.

If you include interest or any of these penalties with
your payment, identify and enter these amounts in
CAUTION the bottom margin of Form 1041-QFT. Don’t include
the interest or penalty amount in the balance of tax due on
line 19.

!

Line 4 – Number of QFTs
If this is a composite return, enter the total number of QFTs
(including separate interests treated as separate QFTs)
included on the return.

Other Penalties
Other penalties can be imposed for negligence, substantial
understatement of tax, and fraud. See Pub. 17, Your Federal
Income Tax, for details on these penalties.

Part II – Tax Computation
Composite Return

Final Form 1041

If you have an existing EIN(s) that you previously used for
filing Form 1041 and that you won’t use again (that is, for
QFTs included in a composite return), you should file Form
1041 and check the final return box.

!

If this is a composite return, enter in Part II the totals
for all the QFTs included on the return.

CAUTION

Income
Line 2a – Total Ordinary Dividends
Report all ordinary dividends received during the tax year.
Report capital gain distributions on Schedule D (Form
1041), line 13.

Instructions for Form 1041-QFT (Rev. 12-2023)

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Line 2b – Qualified Dividends

Line 12 – Tax
Tax rate schedule. Unless the instructions that follow for
Schedule D or Composite Return apply, figure the tax using
the Tax Rate Schedule below. Enter the tax on line 12.

Enter on line 2b the amount reported on line 2a that is a
qualified dividend. A qualified dividend is a dividend received
during the tax year from (a) a domestic corporation, or (b) a
qualified foreign corporation. A qualified dividend doesn’t
include any dividend from a corporation if the corporation is
(or was) exempt from income tax under section 501 or 521 for
the tax year during which the distribution was made, any
amount allowed as a deduction under section 591, or any
dividend described under section 404(k).

2023 Tax Rate Schedule

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If taxable
income
is Over—

$0
2,900
10,500
14,450

Exception. Some dividends may be reported to the trust
as qualified dividends but aren’t qualified dividends. See the
instructions for line 2b(2) in the 2022 Instructions for Form
1041 for more information.

Line 4 – Other Income

Its tax is:

$290 +
2,126 +
3,491 +

10%
24%
35%
37%

Of the
amount
over—
$0
2,900
10,500
14,450

Schdeule D. If the QFT had both a net capital gain and any
taxable income, or any qualified dividends and any taxable
income, complete Part V of Schedule D (Form 1041), and
then enter the tax from line 45 of Schedule D on line 12.

Enter all other types of income not included on line 1a, 2a, or
3. List the type and amount on an attached statement if the
QFT(s) has more than one item.

Composite return. If this is a composite return, check this
box and enter on line 12 the total of the tax figured separately
for each QFT using either the 2022 Tax Rate Schedule above
or Schedule D (Form 1041).

If you are reporting GILTI, include it on the attached
statement. You must also complete and attach Form 8992,
Global Intangible Low-Taxed Income (GILTI).

Line 13 — Credits

Deductions
Allocation of Deductions for Tax-Exempt Income

Specify the type of credit being claimed and attach any
required credit forms. If you are claiming more than one type
of credit, attach a statement listing the type and amount of
each credit claimed. See the Instructions for Form 1041 for
details on the credits that may be claimed.

Generally, no deduction that would otherwise be allowable is
allowed for any expense that is allocable to tax-exempt
income, such as interest on state or local bonds.
Exception. State income taxes and business expenses
that are allocable to tax-exempt interest are deductible.

Line 15 — Net Investment Income Tax
For tax years beginning on or after January 1, 2013, a QFT
may be liable for the NIIT enacted under section 1411. To
determine if this tax applies, see Form 8960, Net Investment
Income Tax—Individuals, Estates, and Trusts, and its
instructions.

Expenses that are directly allocable to tax-exempt income
are allocable only to tax-exempt income. A reasonable
proportion of expenses indirectly allocable to both
tax-exempt income and other income must be allocated to
each class of income.

Line 16 — Total Tax

Limitations on Deductions

If the QFT owes any additional taxes (for example, alternative
minimum tax, recapture taxes, etc.), include these taxes on
line 16. To the left of the entry space, write the type and
amount of the tax. Also attach to Form 1041-QFT any forms
required to figure these taxes (for example, Schedule I (Form
1041)). See the Instructions for Form 1041 for more details
on additional taxes that may apply.

Generally, the amount a QFT has “at-risk” limits the loss it can
deduct in any tax year. Also, section 469 and its regulations
generally limit losses from passive activities to the amount of
income derived from all passive activities. Similarly, credits
from passive activities are generally limited to the tax
attributable to such activities.

Line 17 — Payments

For details on these and other limitations on deductions,
see Deductions in the Instructions for Form 1041.

Include on line 17 any of the following.
• Estimated tax payments made for 2022.
• Tax paid with a request for an extension of time to file.
• Federal income tax withheld (for example, backup
withholding).
• Credit for tax paid on undistributed capital gains. Also
attach Copy B of Form 2439, Notice to Shareholder of
Undistributed Long-Term Capital Gains.

Line 9 – Other Deductions
Attach your own statement, listing by type and amount all
allowable deductions.

!

But
not
over
$2,900
10,550
14,450
----

QFTs aren’t allowed a deduction for a personal
exemption.

CAUTION

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Instructions for Form 1041-QFT (Rev. 12-2023)

administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by
section 6103.

Line 18 — Elective Payment Election.
Enter the total amount from Form 3800 for the elective
payment election.

The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
average time is:

Line 19 — Tax Due
You must pay the tax in full when the return is filed. Make the
check or money order payable to “United States Treasury.”
Write the EIN from line 2 of the form and “2023 Form
1041-QFT” on the payment. Enclose, but don’t attach, the
payment with Form 1041-QFT.

Recordkeeping . . . . . . . . . . . . . . .
Learning about the law or the form . . .
Preparing the form . . . . . . . . . . . . .
Copying, assembling, and sending the
form to IRS . . . . . . . . . . . . . . . . . .

10 hr., 16 min
2 hr., 40 min
6 hr., 40 min
1 hr., 4 min

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Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us this
information. We need it to ensure that you are complying with
these laws and to allow us to figure and collect the right
amount of tax.
You aren’t required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in the

Instructions for Form 1041-QFT (Rev. 12-2023)

If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can send us
comments from www.irs.gov/FormComments. Or you can
send your comments to Internal Revenue Service, Tax Forms
and Publications, 1111 Constitution Ave. NW, IR-6526,
Washington, DC 20224. Don’t send the tax form to this
address. Instead, see Where To File, earlier.

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