Instructions for Form 1041-N |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
This revision reflects the changes necessary to implement the Jobs and Growth Tax Relief Reconciliation Act of 2003. Use this
revision for tax
years beginning after 2003. The changes are all on Schedule D and are as follows:
-
We deleted column (g) in Part I
and II,
-
We deleted 7 lines from Part IV, and
-
We removed the lines for the 8% maximum capital gains tax on qualified 5-year gain, which has been repealed for sales and
other dispositions
after May 5, 2003 (and installment payments received after that date).
An Alaska Native Settlement Trust (ANST) may elect under section 646 to have the special income tax treatment of that section
apply to the trust
and its beneficiaries. This one-time election is made by filing Form 1041-N and the form is used by the ANST to report its
income, deductions, gains,
losses, etc., and to compute and pay any income tax. Form 1041-N is also used for the special information reporting requirements
that apply to ANSTs.
An Alaska Native Settlement Trust is a settlement trust within the meaning of section 3(t) of the Alaska Native Claims Settlement
Act (ANCSA).
An Alaska Native Corporation (ANC) has the same meaning as the term "Native Corporation" has under section 3(m) of the ANCSA.
A sponsoring Alaska Native Corporation means the ANC that transfers assets to an electing Settlement Trust.
A trustee is a fiduciary of the trust. Any reference in these instructions to “you” means the trustee of the trust.
Tax Treatment of an Electing ANST
In general, an electing ANST's taxable income is computed in the same manner as a trust that is taxable under Subchapter J
(which generally is
computed in the same manner as an individual). However, the electing ANST is not allowed to take an income distribution deduction.
It can claim an
exemption deduction, the amount of which depends on the terms of the trust.
See the Schedule K instructions for information on the beneficiaries' tax treatment of distributions received from the ANST.
An electing ANST pays tax on its taxable income, other than its net capital gain, at the lowest rate specified for single
individuals (10%). Net
capital gain (and qualified dividends) is taxed at the capital gains rate that applies to a taxpayer subject to the lowest
taxable income rate for a
single individual (5%).
If, at any time, a beneficial interest in an ANST may be disposed of to a person in a manner that is not permitted by section
7(h) of ANCSA (if the
interest were settlement common stock), then:
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The ANST may not elect the special tax treatment under section 646 for itself and its beneficiaries, and
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If the election is in effect at that time:
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The election will not apply as of the first day of the tax year in which a disposition is first allowed,
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The tax treatment allowed on this form (section 646) will not apply to the trust for that tax year and all subsequent tax
years,
and
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The distributable net income of the trust will be increased by the current or accumulated earnings and profits of the sponsoring
ANC as of
the close of the tax year after adjustment is made for all distributions made by the sponsoring ANC during the tax year. However,
this increase is
limited to the fair market value of the trust's assets as of the date the beneficial interest of the trust first becomes disposable.
If stock in the sponsoring ANC may be disposed of to a person in a manner that is not allowed by section 7(h) of ANCSA (if
the stock were
settlement common stock) and at any time after such disposition of stock is first allowed, the corporation transfers assets
to an ANST, then items 1,
2, and 3 above will apply to the ANST in the same manner as if the ANST allowed dispositions of beneficial interests in the
ANST in a manner not
allowed by section 7(h) of ANCSA.
The surrender of an interest in an ANC or an ANST by the beneficiary or stockholder for a whole or partial redemption or for
the whole or partial
liquidation of the trust or corporation will be considered a transfer allowed by section 7(h) of the ANCSA.
Information Reporting Requirements
Electing ANSTs must complete Schedule K and file it with Form 1041-N. The ANST must also provide a copy of Schedule K to the
sponsoring ANC by the
date Form 1041-N is required to be filed with the IRS. The ANST is not required to provide information to the beneficiaries
on distributions made to
them. The sponsoring ANC will provide the beneficiaries with any required information.
The trustee of any electing ANST having any taxable income, or having gross income of at least $600 for the tax year, must
file Form 1041-N for
that year.
The trustee of an ANST must make this election by the due date (including extensions) for filing the ANST's tax return for
its first tax year.
The trustee makes the election for the ANST by signing Form 1041-N in the signature block on page 1. The return must be filed
by its due date
(including extensions) for filing the ANST's tax return for its first tax year. Once the election is made, it applies to all
subsequent years and may
not be revoked.
ANSTs file Form 1041-N by the 15th day of the 4th month following the close of the tax year. If the due date falls on a Saturday,
Sunday, or a
legal holiday, file on the next business day.
Private Delivery Services
You can use certain private delivery services designated by the IRS to meet the "timely mailing as timely filing/paying" rule
for tax returns and
payments. These private delivery services include only the following.
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DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day
Service.
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Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, FedEx
International
First.
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United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide
Express Plus,
UPS Worldwide Express.
The private delivery service can tell you how to get written proof of the mailing date.
Any changes to this list will be published in the Internal Revenue Bulletin.
Extension of Time To File
Use Form 8736, Application for Automatic Extension of Time To File U.S. Return for a Partnership, REMIC, or for Certain Trusts,
to request an
automatic 3-month extension of time to file.
If more time is needed, file Form 8800, Application for Additional Extension of Time To File U.S. Return for a Partnership,
REMIC, or for Certain
Trusts, for an additional extension of up to 3 months. To obtain this additional extension of time to file, you must show
reasonable cause for the
additional time you are requesting. Form 8800 must be filed by the extended due date for Form 1041-N.
An extension of time to file does not extend the time to pay the tax.
File Form 1041-N with the Internal Revenue Service Center, Ogden, UT 84201.
The trustee or an authorized representative must sign Form 1041-N.
Generally, anyone who is paid to prepare a tax return must sign the return and fill in the other blanks in the Paid Preparer's
Use Only area of the
return. The person required to sign the return must complete the required preparer information and:
-
Sign it in the space provided for the preparer's signature, and
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Give you a copy of the return in addition to the copy to be filed with the IRS.
Paid Preparer Authorization
If the trustee wants to allow the IRS to discuss the ANST's 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's Use Only” section
of the ANST's return. It does not apply to the firm, if any, shown in that section.
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 ANST's return. The trustee is also authorizing the paid preparer to:
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Give the IRS any information that is missing from the ANST's return,
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Call the IRS for information about the processing of the ANST's return or the status of its refund or payment(s), and
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Respond to certain IRS notices that the trustee has shared with the preparer about math errors, offsets, and return preparation.
The notices
will not be sent to the preparer.
The trustee is not authorizing the paid preparer to receive any refund check, bind the ANST to anything (including any additional
tax liability),
or otherwise represent the ANST before the IRS. If the trustee wants to expand the paid preparer's authorization, see Pub.
947, Practice Before the
IRS and Power of Attorney.
The authorization cannot be revoked. However, the authorization will automatically end no later than the due date (without
regard to extensions)
for filing the ANST's next tax return.
Figure taxable income using the method of accounting regularly used in keeping the ANST'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.
Generally, the ANST 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.
All electing ANSTs must adopt a calendar year.
Rounding Off to Whole Dollars
You may round off cents to whole dollars on the ANST's return and schedules. If you do round to whole dollars, you must round
all amounts. To
round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes
$1 and $2.50
becomes $3.
If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and
round off only the total.
Generally, an ANST must pay estimated income tax if it expects to owe, after subtracting withholding and credits, at least
$1,000 in tax. For
details and exceptions, see Form 1041-ES, Estimated Income Tax for Estates and Trusts.
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-file penalty, the accuracy-related penalty, and the fraud penalty. The interest charge is figured at a rate determined
under section 6621.
The law provides a penalty of 5% of the tax due for each month, or part of a month, the return is not filed up to a maximum
of 25% of the tax due.
If the return is more than 60 days late, the minimum penalty is the smaller of $100 or the tax due. The penalty will not be
imposed if you can show
that the failure to file on time is due to reasonable cause. If the failure is due to reasonable cause, attach an explanation
to the return.
Generally, the penalty for not paying the tax when due is 1/2 of 1% of the unpaid amount for each month or part of a month
it remains unpaid. The
maximum penalty is 25% of the unpaid amount. The penalty is imposed on the net amount due. Any penalty is in addition to interest
charges on late
payments.
If you include interest or either of these penalties with your payment, identify and enter these amounts in the bottom margin
of Form 1041-N. Do
not include the interest or penalty amount in the balance of tax due on line 18.
If the trustee underpaid estimated tax, use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts,
to figure any penalty.
Enter the amount of any penalty in the bottom margin of Form 1041-N. Do not include it in the balance of tax due on line 18.
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.
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