SecondCor521
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I am preparing a federal tax return for a family trust for the first time. I've just finished filling out a 2018 Form 1041. (The trust tax returns for 2017 were done by a local CPA firm.)
No withholding was done in 2018. I did a proforma return in December to see if an estimated tax payment would need to be made. My calculations at that time predicted taxes due of less than $1,000, so we did not make any estimated tax payment.
Because I had never done a 1041 before and because the trust has never had large attorney fees before, I did not understand that the attorney fees had to be allocated across the taxable and tax-exempt income. Once I made the allocation, it reduced the deductibility of the attorneys fees by about $5,000, which increased the tax liability of the trust.
It appears that the trust will owe $1,241 in federal income taxes, so none of the three safe harbors was met. Based on a SWAG at Form 2210, the underpayment penalty looks like it will be about $27 if we file in the next few days.
Questions:
1. If I don't request a waiver on behalf of the trust, it looks like we don't have to file Form 2210...is that right?
2. Is the IRS likely to catch the fact that an underpayment penalty may be due?
3. Is there any easy or simple way to request a waiver based on the facts above? I've read about first-time abatement...does that apply?
4. Is there any way I can request a waiver based on the fact that the 1041 instructions were not final until 1/17 and the Form 2210 instructions are still not final as of a day or two ago, plus the fact that the TCJA made an amendment to section 67 regarding deductions that could have affected the trust return?
5. I take it that "taxpayer mistake" isn't usually approved. Is that true in my case, or should I try to ask for mercy?
No withholding was done in 2018. I did a proforma return in December to see if an estimated tax payment would need to be made. My calculations at that time predicted taxes due of less than $1,000, so we did not make any estimated tax payment.
Because I had never done a 1041 before and because the trust has never had large attorney fees before, I did not understand that the attorney fees had to be allocated across the taxable and tax-exempt income. Once I made the allocation, it reduced the deductibility of the attorneys fees by about $5,000, which increased the tax liability of the trust.
It appears that the trust will owe $1,241 in federal income taxes, so none of the three safe harbors was met. Based on a SWAG at Form 2210, the underpayment penalty looks like it will be about $27 if we file in the next few days.
Questions:
1. If I don't request a waiver on behalf of the trust, it looks like we don't have to file Form 2210...is that right?
2. Is the IRS likely to catch the fact that an underpayment penalty may be due?
3. Is there any easy or simple way to request a waiver based on the facts above? I've read about first-time abatement...does that apply?
4. Is there any way I can request a waiver based on the fact that the 1041 instructions were not final until 1/17 and the Form 2210 instructions are still not final as of a day or two ago, plus the fact that the TCJA made an amendment to section 67 regarding deductions that could have affected the trust return?
5. I take it that "taxpayer mistake" isn't usually approved. Is that true in my case, or should I try to ask for mercy?