Enlarge image | For taxable year beginning in 2022 Ohio IT 1041 Fiduciary Income Tax Return Instructions Rev. 12/22 Department of hio Taxation tax. hio.gov |
Enlarge image | IT 1041 Rev. 12/22 Table of Contents A H Adjustments to Federal Income .............................................9-12 Highlights for 2022...................................................................... 2 Allocating Income ..................................................................... 13 Amended Returns....................................................................7-8 I Apportionment Factor ..........................................................14-15 Interest & Penalties .................................................................... 9 IT NRCE ..............................................................................17-20 B Beneficiary Schedule ................................................................ 16 M Matching Allocation Based on Distributions ............................. 22 D Matching Expenses & Loss Amounts ....................................... 21 Due Dates................................................................................... 7 P E Payment Options .....................................................................4-5 Entity Designation....................................................................... 8 Estate Credits ...................................................................... 11-12 R Refundable Business Credits ..............................................15-16 F Refunds ...................................................................................... 9 Filing Tips ................................................................................... 3 Resident Credit Calculation (IT RCTE) ..................................... 16 G T General Information .................................................................... 6 Tax Brackets ............................................................................... 9 Taxable Income .......................................................................... 9 Taxpayer Assistance ................................................................... 1 Online Resources The Department of Taxation's website at tax.ohio.gov has many resources available to assist when filing the Ohio Pass-Through Entity & Fiduciary income tax returns: FAQs – Review answers to common questions on topics. Forms – Find all pass-through entity & fiduciary income tax forms (including related schedules and worksheets). Many forms have fill-in versions that can be completed online, print, and then submit to the Department. Information Releases – Research detailed explanations and legal analyses of certain tax topics. Ohio Virtual Tax Academy – View webinars designed and presented by Department staff on Ohio's state taxes. Tax Alerts – Sign up to receive tax updates and reminders from the Department via email. Federal Privacy Act Notice Because we require you to provide us with a Social Security number, the Federal Privacy Act of 1974 requires us to inform you that providing us your Social Security number is mandatory. Ohio Revised Code 5703.05, 5703.057 and 5747.08 authorize us to request this information. We need your Social Security number in order to administer this tax. |
Enlarge image | IT 1041 Rev. 12/22 Taxpayer Assistance Need Help? – To help answer questions and ensure that the tax returns are filed accurately, the Department of Taxation provides the following resources at tax.ohio.gov: Additionally, the website has all Pass-Through Entity & Fiduciary income tax forms to download or print. If the answer is unavailable on the website, contact the Department using any of the following methods: Email – Click 'Contact Us' at the top right on tax.ohio.gov and select For persons who use text telephones 'Email Us' to access a secure email form, or email directly to Pass- (TTYs) or adaptive telephone equip- ThroughEntity@tax.state.oh.us. ment only: Contact the Ohio Relay Ser- vice at 7-1-1 or 1-800-750-0750 and give Call – To speak with an examiner at 1-888-405-4039 during the the communication assistant the Ohio Department's normal business hours. Department of Taxation phone number Normal business hours are from 8 a.m. to 5 p.m. Monday through that you wish to contact. Friday excluding holidays. Write – Contact the Department by mail at: Ohio Department of Taxation Pass-Through Entity & Fiduciary Income Tax Division P.O. Box 2619 Columbus, OH 43216-2619 Note: Please use the street address listed below to overnight documents to the Department. 4485 Northland Ridge Blvd. Columbus, OH 43229-6596 Form Requests: Visit tax.ohio.gov to easily download our forms. Request tax forms anytime by calling 1-800-282-1782. These instructions contain law references for specific line items and requirements. To review Ohio Pass-Through Entity & Fiduciary income tax law, see R.C. 5747 and R.C. 5733, respectively. Go Paperless and File Electronically! The IT 1041 can be filed electronically through the federal e-file program overseen by the IRS (irs.gov/filing), or through a participating third-party tax preparation product. PTEs can verify their software is compatible with the MeF program by reviewing the list of approved software vendors at PTE and Fiduciary Income Tax - Software Developers. - 1- |
Enlarge image | IT 1041 Rev. 12/22 Highlights for 2022 Tax Bracket Update Schedule E Update (Nonrefundable Business Credits) Beginning with tax year 2022, the tax brackets for fiduciary Schedule E has been updated to include the new Vocational Job income tax have been indexed for inflation. The updated tax Credit (granted by ODE). brackets can be found on page 9. IT RCTE (Trust/Estate Resident Credit) New Vocational Job Credit A new form to calculate the trust’s/estate’s resident credit. This credit is granted by the Ohio Department of Education (ODE). To claim the credit, attach a copy of the certificate from ODE that IT NRCE: Ohio Nonresident Credit for Estates indicates the amount of the credit and the tax year for which the Estates must use the IT NRCE to calculate the nonresident portion credit is awarded. For more information about the requirements for of their federal taxable income. The nonresident portion is used to the credit, visit education.ohio.gov. calculate the Ohio nonresident credit. Include the IT NRCE form with See R.C. 5747.057. the completed IT 1041 and retain a copy for the estate’s records. If the tax preparation software allows for PDF attachments, include IT K-1 a copy of the form. The IT NRCE form may be obtained in the Each entity with Ohio income should prepare a separate IT K-1 for searchable Tax Forms section at tax.ohio.gov. each investor, owner or qualifying beneficiary to enclose with the investor’s, owner’s or beneficiary’s return. Electronic Filing The IT 1041 can be filed electronically through the federal For more information, see the IT K-1 form and instructions on tax. efile program overseen by the IRS (irs.gov/filing), or through a ohio.gov in the searchable Tax Forms section. participating third-party tax preparation product. For a current list of approved software programs, please see the Software Developers Credit Carryforward page on the Ohio Department of Taxation website, and search for Beginning with tax year that start on or after January 1, 2020 the most recent MeF Approval Status link. the credit carryforward of overpayments has been reinstated, however for tax years 2017-2019 the Department did not permit A tax return preparer that prepares more than 11 original tax returns credit carryforwards. A credit carryforward is only allowed on a during any calendar year shall use electronic filing technology. This timely filed, original return; otherwise, any overpayment will be provision does not apply to a tax return preparer in any calendar refunded. year if, during the previous calendar year, the tax return preparer Opportunity Zone Investment Credit Transfer Form prepared not more than 10 original tax returns. A person that holds a wholly or partially unclaimed Ohio Opportunity Zone Investment credit certificate may transfer the right to claim all See R.C. 5747.082 or part of the remaining credit to any other person. The Opportunity Zone Investment Credit Transfer Form is available at tax.ohio. gov. For more information about the credit, visit development.ohio. gov or call ODOD at 1-800-848-1300. See R.C. 122.84(E). - 2 - |
Enlarge image | IT 1041 Rev. 12/22 Filing Tips Provide a Current Address The Department uses the most up-to-date address on file to send correspondence, billings, assessments and refunds. If the address is not correct, refunds and notices will be mailed to the incorrect address. To update an address, check the box above the address line on the return or visit the Business Address Update page at tax.ohio.gov to change the address. Verify the IT 1041 and UPCs are for the Correct Tax Year The Department releases new forms and UPCs each tax year. Do not cross out the year at the top of the IT 1041 or UPC and write in a new one, as doing so will delay the processing of the IT 1041 or UPC. Maintain a Bank Account The trust or estate must maintain its bank account to ensure it can receive refunds after its closing date. The Department cannot change the name on a refund check, nor issue the check directly to a trustee or beneficiary, due to the closing or termination of a trust or estate. Report FEIN or SSN in Correct Field Do not enter an SSN in the FEIN field nor enter a FEIN in the SSN field. Determine Residency of the Trust A trust’s residency is determined under Ohio law using a series of tests; it is not determined based on the location of either the trustee or the administration of the trust’s assets. Please note, it is possible that more than one residency test can apply to all or a portion of a trust. See R.C. 5747.01(I)(3) and Information Release IT 2003-02 - Trust Residency. Reprint Corrected Software-Generated Paper Returns If the printed software-generated return from a tax preparation program subsequently requires changes on the return, do not write in the changes. Use the software to make the necessary changes, save, and reprint the return. The Department’s system will not pick up handwritten changes on returns generated by tax preparation software. Complete All Applicable Schedules on the Return When filing via a software program, complete all relevant schedules and do not override any line items. Information from schedules on the return flows to other lines that are used to calculate the tax liability. If the schedules are not completed, a value of zero will flow to the corresponding lines, which will override any amounts that may have been entered. Report Trust income as Follows: ● Qualifying trust amounts on schedule VI (see page 13 for instructions); ● Apportioned modified business income and qualifying investment income on schedule VII (see page 13 for instructions); ● Allocated modified nonbusiness income on schedule VIII (see page 13 for instructions). Trust income categorized incorrectly may result in a potential billing notice or refund reduction. Report Apportionment Ratio and Ownership Percentage Enter percentages and ratios in decimal format (e.g., report 30.09% as .3009). Report 100% as 1.0000. Enter apportionment ratios in decimal format and carry to six decimal places. In addition, do not enter text (e.g., “null” or “zero”) in numeric fields. Report Estimated Payments, Withholding, and Credits on Correct Lines Incorrect reporting of the payments, withholdings, and credits may result in a denied/reduced refund or bill. ● Report estimated payments and withholding/overpayments previously claimed on Schedule XI – Net Payment Worksheet as follows: ● Line 79a: Enter estimated payments made with an IT 1041 UPC or EFT payments made through the Ohio Treasurer of State for this tax year; ● Line 79b: Enter 1099 withholding; ● Line 79c: Enter W-2 withholding; ● Line 79e: [Amended Return ONLY] Enter the refund amount from line 17 from the original return filed for this tax year. ● Report refundable business credits on Line 15 of Schedule 1 and on Schedule XII – Refundable Business Credits as follows: ● Line 81: Enter the Motion Picture/Broadway credit; ● Line 82: Enter the refundable portion of the Job Retention credit and the Job Creation credit; ● Line 83: Enter the Pass-Through Entity credit; ● Line 84: Enter the Venture Capital credit; ● Line 85: Enter the refundable portion of the Ohio Historic Preservation credit. ● Report nonrefundable business credits on Line 10 of Schedule 1 and on Schedule E. Include a copy of Schedule E, Schedule of Nonrefundable Business Credits, and include copies of the required certificates and/or IT K-1s for verification. ● Do not use Schedule E to claim refundable credits. Instead, claim refundable credits on the appropriate “refundable credits” line. Calculate the Resident Tax Credit on the Trust’s Modified Nonbusiness income Include only the modified nonbusiness income in the calculation of the resident trust tax credit on Schedule IX. Failure to do so may result in a denied/reduced refund or bill. Report Proportionate Share of Credits A distribution made by a trust/estate may affect the amount of a credit it is allowed to claim on its IT 1041. Credits must be shared between the trust or estate and the beneficiaries in proportion to the income retained versus distributed. See R.C. 5747.02(C)(3). - 3 - |
Enlarge image | IT 1041 Rev. 12/22 Payment Options First-Time Filers: Submit PTE Registration Form Before First Estimated Payment If the trust or estate is a first-time filer, submit the Pass-Through Entity and Fiduciary Income Tax Registration Form before submitting the first estimated payment. The form can be found on the tax.ohio.gov website in the Tax Forms search. Failure to submit the regis- tration form may result in a delay in processing the estimated payment(s), resulting in a billing notice or refund delay. Submit a Separate Check for Each Balance A separate check is required for each tax return payment, estimated payment, billing/assessment payment, etc. The Department cannot apply a single check to multiple balances. The check or money order should be made payable to “Ohio Treasurer of State” with identify- ing information on the memo line, including: ● Federal employer identification number (FEIN), orSSN for decedent’s estate,only ● Tax form using the payment (IT 1041) ● Tax year end for the payment (mm-dd-yy) Using Payment Coupons Created by Third-Party Software Before submitting a payment coupon created by third party software, please verify the reporting period end date matches the software- generated Key ID numbers and the number string at the bottom of the payment coupon, in the format MMYY. If mismatched, the pay- ment will be misdirected, causing a delay in processing the estimated payment(s), resulting in a billing notice or refund delay. Please contact the third-party software company’s support line to resolve. Methods for Making PTE and Fiduciary Income Tax Payments 1. Electronic Funds Transfer (EFT): Payments may be remitted by EFT (ACH credit) via the Ohio Treasurer of State (TOS). Any questions about the EFT payment process should be directed to the Ohio Treasurer of State by calling (877)338-6446. This is an ACH credit option; the entity initiates the payment through its own bank. No online credit card payment or ACH debit option exists at this time either through the Ohio Treasurer of State (TOS) or the Ohio Department of Taxation. Access the applicable tax form-specific link below for the information page with the TOS routing/account numbers and codes/ format the financial institution must use to issue the ACH credit via the TOS payment option: IT 4708 Pass-Through Entity Composite Income Tax Payments IT 1140 Pass-Through Entity and Trust Withholding Tax Payments IT 1041 Fiduciary Income Tax (Trusts and Estates) Payments IT 4738 Electing Pass-Through Entity Income Tax Payments instructions unavailable, as of publishing. Use IT 1140 payment instructions. NOTE: The TOS no longer requires PTE and fiduciary filers to submit an EFT authorization form to register before making an IT 4708, IT 4738, IT 1140 and/or IT 1041 payment via ACH credit (no ACH debit option). 2. Check or Money Order: Make check or money order payable to “Ohio Treasurer of State.” A payment made by a check or money order must be submitted with the appropriate Ohio Universal Payment Coupon (UPC) based on the form filed. All UPCs can be found on the tax.ohio.gov website in the searchable Tax Forms section by entering “UPC” in the Form Title or Number field. Please mail the payment and UPC to the address on the UPC or hand deliver to our self-service walk-in center. 3. Electronic Check: When filing electronically through an approved software program, the PTE or fiduciary has the option to make a payment by electronic check in the form of an Electronic Funds Withdrawal, or direct debit. The direct debit option is only available for e-filed returns. For mailed returns created from an approved software program, the options for payment are 1) Electronic Funds Transfer (EFT), or 2) check or money order, as listed above. For a current list of approved software programs, please see the Software Developers page on the Ohio Department of Taxa- tion website, and search for the most recent MeF Approval Status link. Please contact the software companies directly for their electronic payments support. - 4 - |
Enlarge image | IT 1041 Rev. 12/22 Payment Options Continued Completing the Universal Payment Coupon (UPC) Each payment made by check or money order must be submitted with the appropriate Ohio Universal Payment Coupon (UPC). Ap- plication of payments is driven by the UPC used and is based on which form is filed (i.e., IT 1041, IT 4708, IT 4738, or IT 1140). Each UPC allows the Taxpayer to make either an estimated payment (“ES” payment) or payment submitted with the tax return (“P” payment). Only one type of payment can be made on each UPC submitted. All UPCs can be found on the searchable Tax Forms page by entering “UPC” in the Form Title or Number field. The IT 1041 UPC is used by trusts and estates to make either an estimated payment (IT 1041ES Trust or Estate) or a payment submit- ted with the trust/estate return (IT 1041P Trust or Estate). When completing the UPC: ● Indicate the reporting period by providing the filing period start date and end date in the format mm-dd-yy; ● Specify the appropriate payment type (IT 1041ES Trust or Estate or IT 1041P Trust or Estate); ● Enter the entity type code in the box above the payment amount (*see codes on instructions page above UPC); ● Enter the amount of payment as a whole number without a decimal, as the UPC features a preprinted “.00”; ● A FEIN should be entered for a trust. The SSN field should only be used by the estate. Sample IT 1041 UPC: This form must be included with each check or money order. Include a Check or Money Order with each IT 1041 UPC Payable to “Ohio Treasurer of State” with identifying information on the memo line, including: ● Federal employer identification number ( FEIN), orSSN for decedent’s estateonly ● Tax form using the payment (IT 1041) ● Tax year end for the payment (mm-dd-yy) - 5 - |
Enlarge image | IT 1041 Rev. 12/22 The trust or estate is not required to file the IT 1041 if the following 2022 Ohio Form IT 1041 three scenarios apply: General Instructions ● The trust or estate’s federal 1041 or federal 1040NR shows no taxable income or has a negative taxable income (e.g., simple Who must file the IT 1041? trusts and most estate tax returns); All estates and trusts, including foreign estates and trusts, that are ● The trust or estate did not earn or receive any Ohio sourced subject to the Ohio fiduciary income tax must file the IT 1041 and income during the tax year; AND pay any tax due. All estates are subject to tax on their Ohio taxable ● There are no Ohio adjustments that would result in Ohio income, while all trusts are subject to tax on their modified Ohio taxable income. taxable income. Generally, estates that file the federal 1041 and See R.C. 5747.02 and 5747.08. reside in Ohio, or earn or receive income in Ohio, must file the IT 1041. Trusts that file the federal 1041 or the federal 1040NR and How does a federal §645 election impact the IT 1041? have retained earnings and earn or receive income that is allocable An election under IRC §645 allows the executor of an estate and or apportionable to Ohio, must file the IT 1041. the trustee of a revocable trust to elect to treat the trust as part of the estate for federal tax purposes. The beneficiaries of an estate Foreign estates and trusts are not necessarily exempt from Ohio that make a §645 election must use the federal taxable income as income tax. Instead, Ohio levies its fiduciary income tax on every the starting point for completing the IT 1041. The estate must also estate or trust residing in or earning or receiving income in Ohio. designate the same estate type(s) selected on the federal 1041. “Trust” is specifically defined to include any trust described in IRC §641- §685 that is not one of the following trusts: The estate may only claim deductions and credits available to an estate on its IT 1041; it cannot claim any credits or deductions, and ● Grantor trusts should not check any boxes, available only to trusts. However, the ● Charitable remainder trusts beneficiary can claim any credits and withholding amounts belonging ● Retirement trusts to the trust identified in the §645 election. ● Pre-need funeral trusts Note: The estate must include a copy of the federal return when ● Qualified funeral trusts filing the IT 1041 as evidence of its §645 election. ● Endowment and perpetual care trusts ● Qualified settlement trust and funds What Trust Income is Subject to Tax? ● Retirement trust funds A trust is taxed on its “modified Ohio taxable income.” The modified See R.C. 5747.02(A)(1) and (2), 5747.02(D), 5747.01(S), and Ohio taxable income is based on the trust’s federal taxable income, 5747.01(AA). subject to the adjustments on Schedule II of the IT 1041. After determining its “modified Ohio taxable income” the trust must How does the residency of the trust affect the taxation of the trust? determine which of the following types of income it is required to A trust’s residency status only affects how its modified nonbusiness report: income is taxed. A trust’s modified nonbusiness income is the portion ● Qualifying trust amount: Capital gains and losses from the of the trust’s Ohio taxable income that is not included on schedules sale, exchange, or other disposition of equity or ownership VI – Allocated Qualifying Trust Amounts and VII - Apportioned interests in, or debt obligations of, a qualifying investee to the Income Amounts of the IT 1041. Some examples of modified extent included in the trust’s Ohio taxable income, but only if nonbusiness income that are taxable to Ohio can be found under the the following requirements are satisfied: section on this page labeled “What Trust Income is Subject to Tax?” ● The book value of the qualifying investee’s physical assets in this state and everywhere as of the last day of the qualifying Generally, most income reported by a trust is modified nonbusiness investee’s fiscal or calendar year ending immediately prior income. A resident trust is required to pay Ohio income tax on all to the date on which the trust recognizes the gain or loss modified nonbusiness income but may claim a resident credit on available to the trust. Schedule IX of the IT 1041. The resident credit equals the lesser of ● The trust owns at least 5% of the qualifying investee during modified nonbusiness income subjected to tax in another state, or the previous 10 years. the amount of tax paid to another state on that income. ● Modified Business Income: Business income included in a trust’s Ohio taxable income after such taxable income is first Conversely, a nonresident trust is required to pay Ohio income tax reduced by the qualifying trust amount, if any. on the items of modified nonbusiness income only to the extent ● Qualifying Investment Income: acquisition, ownership, or they are from property that is located in Ohio or intangible property disposition of intangible property, loan fees, financing fees, used in Ohio. Additionally, lottery winnings are taxable as modified consent fees, waiver fees, application fees, net management nonbusiness income. fees, dividend income, interest income, net capital gains from See R.C. 5747.01(AA)(3), (4)(c) and 5747.20(B). the sale or exchange of intangible property, or distributive shares of income. Is a trust that only has investment income required to file? ● Modified Nonbusiness Income: Is a portion of the trust’s Ohio A resident trust investing only in savings accounts, certificates of taxable income other than the qualifying trust amount, and other deposit, stocks, bonds, commercial paper and/or mutual funds will than the allocated qualifying trust amount, and apportioned owe Ohio income tax if the trust had federal taxable income after income amounts; to the extent such qualifying investment distributions. The tax on each resident trust is based on the trust’s income is not otherwise part of modified business income. federal taxable income, plus or minus the adjustments set forth on Some examples of modified nonbusiness income that are the IT 1041. taxable to Ohio include: ● Capital gains or losses from the sale, exchange or transfer However, a nonresident trust investing only in savings accounts, of real or tangible personal property; certificates of deposit, publicly traded stocks, bonds, commercial ● Rents and royalties from real or tangible personal property; paper and/ or mutual funds will not owe any Ohio income tax. ● Royalties from patents or copyrights; See R.C.5747.01(I)(3), 5747.01(S), 5747.01(AA)(3) and (4)(c) and ● Lottery winnings and gains and/or losses from the sale or transfer of such winnings. 5747.20(B). If the trust or estate has a loss is it still required to file an IT 1041? See R.C. 5747.01(AA) and 5747.02(A)(1). The trust or estate may still have an IT 1041 filing requirement, even if it reports a loss on the federal 1041 during the tax year, as adjustments on Schedule II could result in Ohio taxable income. - 6 - |
Enlarge image | IT 1041 Rev. 12/22 How should a Qualified Pre-Income Tax Trust complete the IT 1041? Estimated Tax Payments A trust that made the election to be a qualified pre-income tax trust The trust or estate must make estimated tax payments with the is not subject to Ohio income tax. However, such a trust must file IT 1041ES Universal Payment Coupon (UPC) for the entity’s the IT 1041, as follows, for informational purposes: taxable year If the trust or estate’s estimated tax liability after ● Include only pages 1 and 2 of the IT 1041; credits is greater than $500. The interest penalty applies to ● Check the “qualified pre-income tax trust” box at the top of estimated payments not timely made. For more information, see page 1; page 9. ● Enter the trust’s federal taxable income on line 1; Due Dates for Estimated Tax Payments ● Deduct the amount entered on line 1 on line 2; If any filing due date set forth below falls on a weekend or on ● Enter zero on lines 3 and 13; AND a holiday, then the due date becomes the first business day ● Include a copy of the acknowledgment from the Department thereafter. that the trust is exempt from Ohio income tax. % Cumulative Estimated Payments See R.C. 5747.01(EE). Due Date for Estimated Payments Made When is the Return Due? On or before the 15th day of the 4th For all trusts and estates, the IT 1041, along with all supporting month of the taxable year. 22.5% of the current year tax liability documentation such as IT K-1(s), W2s, 1099s and federal 1041 or federal 1040NR, is due by the date listed in the table below. If any On or before the 15th day of the 6th 45% of the current year tax liability filing due date set forth falls on a weekend or on a holiday, then the month of the taxable year. due date becomes the first business day thereafter. On or before the 15th day of 9th 67.5% of the current year tax liability month of the taxable year. Filing Extensions If the trust or estate has a 12/31/2022 calendar year end, the entity can extend the due date for filing the IT 1041 to September 30, 2023, On or before the 15th day after the 90% of the current year tax liability provided it qualifies for an IRS extension of time to file. Ohio does close of the taxable year not have an extension request form but honors the IRS extension. Does Ohio Follow the Alternative Preparer Signature Procedures? Include a copy of the IRS extension or IRS acknowledgement, and/ The Department follows the federal alternative preparer or the extension confirmation number, if electronically filed. If the signature procedures found in federal Notice 2004-54; However, trust or estate has a fiscal taxable year end, it will have a different extension due date. See the table below for extension due dates. the paid preparer must print (not sign) his/her name if the taxpayer authorizes the preparer to discuss the return with the An extension of time to file does not extend the time for Department. payment of the tax due. The trust or estate must make extension payments with the required IT 1041 UPC available at the link Tax Preparers with a Preparer Tax Identification Number (PTIN) must Forms, or by searching for “UPC” in the Form Title or Number field provide it on all returns. on the TAX FORMS page at tax.ohio.gov. Interest will accrue on See R.C. 5703.262(B) and 5747.08(F). any tax not paid by the due date, and penalties may also apply. If the trust or estate has a fiscal year end, please see the table below. Can the Trust or Estate’s Tax Preparer Contact the Interest will accrue on any unpaid tax, and penalties may also apply. Department About the Tax Return? See table below. The fiduciary of the estate or trust can check the box above the tax preparer’s name on page 2 of the return to authorize the Table 1: TY 2022 Due Dates and Extended Due Dates preparer to: Fiscal Year IRS Due Ohio Due IRS Ext. Due Ohio Ext. Due ● Contact the Department about the status of the trust or Ends Date Date Date Date estate’s return, payments, or refund; 12/31/22 4/18/23 4/18/23 10/02/23 10/02/23 ● Provide the Department with information missing from the trust or estate’s return; AND 1/31/23 5/15/23 4/15/24 10/31/23 4/15/24 ● Respond to inquiries or notices from the Department related to the return. 2/28/23 6/15/23 4/15/24 11/30/23 4/15/24 See R.C. 5747.08(J). 3/31/23 7/17/23 4/15/24 01/02/24 4/15/24 What is the IT K-1? 4/30/23 8/15/23 4/15/24 1/31/24 4/15/24 The IT K-1 allows the trust or estate to report its income, adjustments, credits, and apportionment information to its 5/31/23 9/15/23 4/15/24 2/29/24 4/15/24 beneficiaries. The information is used by the trust or estate’s beneficiaries when completing the IT 1040, IT 1041, IT 4708, or 6/30/23 10/16/23 4/15/24 4/01/24 4/15/24 IT 4738. 7/31/23 11/15/23 4/15/24 4/30/24 4/30/24 The trust or estate must complete two copies of the IT K-1 for each beneficiary whose income is included on the IT 1041. One 8/31/23 12/15/23 4/15/24 5/31/24 5/31/24 copy of the IT K-1 must be included when filing the IT 1041. The other copy should be provided to the beneficiary. 9/30/23 1/16/24 4/15/24 7/01/24 7/01/24 The IT K-1 is available in the searchable Tax Forms section at 10/31/23 2/15/24 4/15/24 7/31/24 7/31/24 tax.ohio.gov. For additional information, please see the IT K-1 category in the PTE FAQs at tax.ohio.gov. 11/30/23 3/15/24 4/15/24 9/03/24 9/03/24 Amended Returns See R.C. 5747.08(G) and Ohio Admin Code 5703-07-05. The fiscal year ends referenced in the above table may or may not reflect a When to Amend 12-month filing period. The trust or estate can file an amended IT 1041 to report changes to the originally filed return. An amended return can result in either a tax due or a refund based on the changes. Under certain - 7 - |
Enlarge image | IT 1041 Rev. 12/22 circumstances, an amended return may be required. To amend File Prior to Out of Statute the IT 1041 the trust or estate should file a new return showing the Ohio’s fiduciary income taxes generally have a four-year statute of original amounts for any item that remains unchanged and reflecting limitations. The Department has four years to issue an assessment all proposed changes; indicate that it is amended by checking the from the later of when the return was due or filed. The PTE or box at the top of page 1. fiduciary has four years from the date of the payment to request a refund. Please see the table below for details. Please include a copy of the following with the amended return: ● Any canceled checks used as payment on the originally filed Tax Year Due Date Timely Payment or Withholding Out-of-Statute Date return; AND 2018 4/15/19 4/18/23 ● Supporting documentation that reflects the reason(s) for filing the amended return. 2019 7/15/20 7/15/24 Note: It may take at least 180 days from the date of receipt to 2020 5/17/21 5/15/25 process the amended return. 2021 4/18/22 4/15/26 For additional information, see tax.ohio.gov for FAQs. 2022 4/18/23 4/15/27 When not to amend the return Some common mistakes may not require an amended return. Some Completing the Applicable examples include: Check Boxes on Page 1 of the Ohio IT 1041 ● Math errors; ● Missing pages or schedules; On page 1 of the return, the entity must designate whether it is ● Demographic errors; OR an estate or a trust. Trust and estate types (other than resident, ● Missing income statements (W-2, 1099, K-1) or credit certificates. nonresident, irrevocable or testamentary) are determined by the federal 1041 filing. In these situations, the department will either make the corrections to the return or contact the trust or estate to request the needed Estates must select one or both of the following: documentation. ● Decedent’s estate Requesting a refund ● Bankruptcy estate The trust or estate may want to amend the return to request an additional credit, deduction or payment. Such changes may result Trusts must select one or the other of each of the following: in a refund. The trust or estate has four years from the date of ● Simple or complex the payment to request a refund. The trust or estate must include ● Resident or nonresident supporting documentation to substantiate the changes reported on the amended return. Some common required documentation Note: If applicable, the trust should also select one or more of the includes: following: ● The federal return, including applicable schedules and ● Irrevocable attachments; ● Testamentary ● Copies of income statements (W-2, 1099, etc.); ● IT K-1, or credit certificates from DSA; Trust Residency ● Form IT NRCE. A “resident” trust is a trust that in whole or in part resides in Ohio. If the resident trust resides in part, it is only a resident with respect to Reporting additional tax due that part. See R.C. 5747.01(I)(3) and information release IT 2003-02. The trust or estate should amend the return to report additional income or reduce a previously claimed credit or deduction. A trust created at the time of an individual’s death under a will Such changes may result in additional tax due. Payment should (testamentary) is a testamentary trust. A testamentary trust resides be included with the amended return using an IT 1041 UPC in Ohio if the decedent at the time of death was domiciled in Ohio payment coupon. for Ohio estate tax purposes (R.C. 5731). Changes to the federal return An irrevocable trust resides in Ohio if (i) at least one “qualifying If the IRS makes changes to the federal return, either based on beneficiary” (R.C. 5747.01(I)(3)(c)) is domiciled in Ohio for all or an audit or an amended return, and those changes affect the Ohio a portion of the trust’s taxable year and (ii) at any time the trust return, the trust or estate is required to file an amended IT 1041. received assets from one or more of the following: Do not file the amended Ohio return until the IRS has finalized the changes to the federal return. Once the changes are finalized, ● An individual who was domiciled in Ohio for income tax purposes at the time he/she transferred assets to the trust; OR please include a copy of all of the following: ● An individual who was domiciled in Ohio for income tax ● The federal amended 1041; purposes at the time the trust document became irrevocable ● The IRS acceptance letter; OR even if the individual was not domiciled in Ohio at the time he/ ● The refund check issued to the trust or estate by the IRS, if she transferred the assets to the trust; OR applicable ● An estate of an individual who at the time of death was domiciled in Ohio for estate tax purposes; OR Note: Instead of including a copy of these documents, the trust ● An insurance company, pension plan or court award on account or estate may be able to submit a copy of the IRS Tax Account of the death of an individual, and at the time of the individual’s Transcript reflecting the updated federal return information. death either (i) the individual was domiciled in Ohio for estate tax purposes or (ii) the owner of the insurance policy was The amended IT 1041 should be filed no later than 90 days after domiciled in Ohio for income tax purposes. the IRS completes its review of the federal return. Failure to file ● Note: The list above is not all-inclusive. For additional the return within this time period may result in an assessment or a information, see R.C. 5747.01(I)(3)(a),(e) and (f). denial of the refund claim. The 90 days begins to run when: Estate Residency An estate is a resident if the decedent was domiciled in Ohio at ● The period for the federal appeal has expired; the time of death. See R.C.5747.01(I)(2). ● The date on the refund issued by the IRS; OR ● The date a federal settlement agreement is signed. See R.C. 5747.10. - 8 - |
Enlarge image | IT 1041 Rev. 12/22 Schedule I – Taxable Income, Tax, Payments and Net Line 15 – Refundable Business Credits Amount Due Calculations This line must match line 87, the sum of all refundable business Line 4 – Trusts- Allocated Qualifying Amount credits. Any difference on these lines will result in a delay in processing the return and a possible refund reduction or billing. This line must match the summary line 61. Any difference on these lines will result in a delay in processing the return and a Line 18 – Amount of Line 17 to be Credited Toward Next Year’s possible refund reduction or billing. Liability Line 5 – Trusts - Apportioned Income Beginning with filing periods that start on or after January 1, 2020 the credit carryforward of overpayments has been reinstated, however This line must match the summary line 64. Any difference on for tax years 2017-2019 the Department did not permit credit these lines will result in a delay in processing the return and a carryforwards. A credit carryforward is only allowed on a timely possible refund reduction or billing. filed, original return; otherwise, any overpayment will be refunded. Line 6 – Trusts - Modified Nonbusiness Income Line 19 – Amount of Line 17 to be Refunded This line must match the summary line 67. Any difference on Interest on Overpayments. Once the return has been verified, these lines will result in a delay in processing the return and a if the refund exceeds one dollar it will be refunded to the trust or possible refund reduction or billing. estate. The trust or estate will receive interest on the refund from the date of payment until the date of the refund if the amount is not Line 8 – Tax on Ohio Taxable Income (Estates) or Modified refunded within 90 days of the later of the return’s due date, or the Ohio Taxable Income (Trusts) date the return was filed. Use Table 2 to compute the tax based upon the amount on line 3 During the calendar year 2023, the interest rate is 5%. for estates or line 7 for trusts. Table 2: TY 2022 Estates and Trusts Income Tax Brackets See R.C. 5747.11(B) and (C)(1). and Marginal Tax Rates TY 2022 Ohio Taxable Line 21 – Interest Due on Late Payment of Tax more thanIncome Bracketsnot more than TY 2022 Ohio Tax Interest is due on any unpaid tax exceeding one dollar from the unextended due date until the date the tax is paid. An extension of $ 0 – $ 26,050 1.38462% of Ohio taxable income time to file does not extend the payment due date. The interest rate $ 26,050 – $ 46,100 $ 360.69 plus2.765% of excess over $ 26,050 for calendar year 2023 is 5%. $ 46,100 – $ 92,150 $ 915.07 plus3.226% of excess over $ 46,100 See R.C. 5747.08(G). $ 92,150 – $ 115,300 $2,400.64 plus3.688% of excess over $ 92,150 Line 22 – Total Amount Due if any More than $ 115,300 $3,254.41 plus3.990% of excess over $ 115,300 Make payments by: See R.C. 5747.02(A) ● Electronic check through an approved software program when filing electronically; Line 10 – Credits from Schedules IV, V, IX and E ● Sending a personal check/money order with the Ohio UPC; ● Electronic funds transfer (EFT) through the Ohio Treasurer ● Estates should enter the sum of lines 55 and 58 of the IT 1041 of State. and line 11 of the Ohio Schedule E. ● Trusts should enter the sum of lines 74 of the IT 1041 and line For questions regarding the EFT payment program, see the 11 of the Ohio Schedule E. Electronic Funds Transfer Via Ohio Treasurer of State (TOS) at ● Schedule E, Nonrefundable Business Credits is available in the Business Tax - Pay on our website at tax.ohio.gov. Online searchable Tax Forms section of tax.ohio.gov. If $1.00 or less is owed, no payment is necessary. Note: The trust/estate is only entitled to the portion of the credits that relate to the retained earnings in the trust/estate. Schedule II – Adjustments to Federal See R.C. 5747.02(C)(3) Taxable Income Line 12 – Interest Penalty on Underpayment of Estimated Tax Additions ● A trust or estate that does not make timely, sufficient estimated The following apply to both trusts and estates except where noted. payments may be subject to the 2210 interest penalty. A trust or estate filing the IT 1041 should use pages 1 and 2 of the Ohio IT/ Line 23 – Federal and/or Non-Ohio State or Local SD 2210 to determine if an interest penalty is due, and if so the Government Interest and Dividends Not Distributed interest penalty amount. This form is available in the searchable Enter the following: Tax Forms section of tax.ohio.gov. ● Interest and/or dividends paid on obligations or securities from a non-Ohio state; AND/OR ● Interest and/or dividends paid on obligations or securities from The trust or estate will owe an interest penalty if (i) the Ohio tax due a non-Ohio local government. is greater than $500 and (ii) withholdings, timely estimated payments and refundable credits are less than either of the following: Do not include: ● Any amounts already included in federal taxable income; ● 90% of the 2022 Ohio tax liability OR ● Interest and/or dividends paid on obligations or securities from ● 100% of the 2021 Ohio tax liability Ohio; ● Interest and/or dividends paid on obligations or securities from Note: A trust or estate may be subject to the penalty even if it is an Ohio local government; AND due a refund when filing its return. ● Interest and/or dividends paid on obligations or securities from a U.S. territory. See R.C. 5747.09(D) and (E). See R.C. 5747.01(S)(1) and (2). - 9 - |
Enlarge image | IT 1041 Rev. 12/22 Line 24 – Pass-Through Entity Taxes Paid/Electing Pass- Source of Add-back §168(k) Add-back Add-back Through Entity Taxes Paid Depreciation Amount (§179- Ratio Amount 25,000) Enter the proportionate share of tax paid by a pass-through entity PTE A - $100,000 5/6 $83,333 on the IT 1140 or an electing pass-through entity on the IT 4738 to operations the extent not included in computing taxable income or Ohio taxable PTE B - income. These taxes may be reported to the trust/estate on an IT distributive share/ $80,000 5/6 $66,667 bonus expense K-1 or provided with the federal K-1. See R.C. 5747.01(S)(11) and R.C. 5747.01(S)(15). Total add-back $100,000 $80,000 $150,000 for tax year: Line 25 – Electing Small Business Trust (ESBT) Income Example 2: A trust owns PTE A and PTE A owns PTE B. PTE A Add the distributive share of income from an S corporation. This has $180,000 subject to add-back for the current tax year. $100,000 amount is apportionable business income and must be included on is §179 depreciation from PTE A’s business operations. $80,000 Schedule VII. Do not include on Schedule VIII. is 168(k) depreciation from its distributive share of bonus expense from PTE B. PTE B increased its Ohio employer withholding for Note: Such income is not included in the trust’s federal taxable its employees by at least 10% over the previous tax year. The add income. back ratios will be the same for PTE A and PTE B since the Trust is the taxpayer. See R.C. 5747.01(S)(13). Add-Back – Combined add-back Line 26 – Losses from the Sale or Disposition of Ohio Public Source of Add-back §168(k) Add-back Add-back Obligations Depreciation Amount Ratio Amount (§179- Enter any loss resulting from the sale/disposition of Ohio public 25,000) obligations to the extent that such losses have been deducted in PTE A - $100,000 5/6 $83,333 determining federal taxable income. operations See R.C. 5747.01(S)(7) and 5709.76. PTE B - distributive share/ $80,000 5/6 $53,333 Line 27 – Reimbursement of Expenses bonus expense Total add-back $100,000 $80,000 $136,666 Enter reimbursements received in 2022 for any expenses that the for tax year: trust/estate deducted on a previously filed Ohio fiduciary income tax return if the amount of the reimbursement was not included in Example 3: A trust owns PTE A and PTE A owns PTE B. PTE A federal taxable income. has $180,000 subject to add-back for the current tax year. $100,000 is §179 depreciation from PTE A’s business operations. $80,000 See R.C. 5747.01(S)(9)(b). is 168(k) depreciation from its distributive share of bonus expense from PTE B. The trust’s federal taxable income is ($100,000). The Line 28 – IRC §168(k) bonus depreciation and §179 expense trust would calculate its depreciation add-back as follows: add-back Add-Back – NOL Check the box for the appropriate add-back ratio. Source of Add-back §168(k) Add-back Add-back Income Amount Ratio Amount Add 5/6 of Internal Revenue Code (IRC) §168(k) bonus depreciation (§179- allowed under the IRC Code. Also, add 5/6 of any qualifying §179 25,000) depreciation expense. However: PTE A - $100,000 6/6 $100,000 operations ● Replace “5/6” with “2/3” for employers who increase their Ohio income taxes withholding by an amount equal to or greater than PTE B - distributive share/ $80,000 6/6 $80,000 10 percent over the previous year; OR bonus expense ● Replace “5/6” with “6/6” for taxpayers who incur a net operating loss (NOL) for federal income tax purposes if the loss was a direct/ Total add-back $100,000 $80,000 $180,000 for tax year: indirect result of the §168(k) and/or §179 depreciation expenses. Put the total year add-back amount on line 53 of Schedule IV. If the amount of qualifying §179 depreciation expense is greater than $200,000, the $25,000 deduction is reduced dollar for dollar To the extent this amount is apportionable, it should for any amount over $200,000 per the IRC as it existed as of be included on Schedule VII. If the amount is December 31, 2002. ! apportionable, do not include on Schedule VIII. CAUTION Using the following lines from federal form 4562, the add-back formula is (line 12 - $25,000) + line 14 + line 25. The sum of these For additional information, please see the PTE Bonus Depreciation lines is multiplied by the appropriate ratio. FAQs at tax.ohio.gov and R.C. 5747.01(S)(14) and (A)(17). Additionally, there is no requirement to make Ohio’s depreciation Line 29 – Personal Exemption (Estates Only) add-back in either of the following circumstances: ● The depreciation is from a PTE, and the investor owns less than Enter the amount of the personal exemption allowed to the estate 5% of the PTE. This is true even if the PTE performed the add- pursuant to I.R.C. 642(b). See R.C.5747.01(S)(3). back on its Ohio filing (i.e. the IT 1140, IT 4708 or IT 4738); OR ● A PTE who increases their Ohio income taxes withheld over the Federal Conformity Adjustments (Estates and Trusts). Line 29 is previous year’s by an amount greater than or equal to the sum also for federal conformity adjustments, however, the trust/estate of §168(k) and/or §179 depreciation amounts. must make all other required adjustments for this line. Example 1: A trust owns PTE A and PTE A owns PTE B. PTE A For more information, see Ohio Conformity Updates at tax.ohio.gov. has $180,000 subject to add-back for the current tax year. $100,000 is §179 depreciation from PTE A’s business operations. $80,000 Line 30 – Expenses Claimed on Ohio Estate Return is 168(k)depreciation from its distributive share of bonus expense This line is no longer applicable. Enter -0- on this line. See R.C. from PTE B. 5747.01(S)(8). - 10 - |
Enlarge image | IT 1041 Rev. 12/22 Deductions Line 38 – Farm Income (Trusts Only) The following apply to both trusts and estates except where noted. Deduct any amount that a trust was required to report as farm Deduct the income items described below only to the extent that income on its federal 1041 tax return but only if the assets of the these amounts have not already been deducted or excluded from trust directly or indirectly include at least 10 acres of land. federal taxable income. See R.C. 5747.01(S)(12) and 5713.30. Line 32 – Federal Interest and Dividends Exempt from State Taxation Line 39 – IRC §168(k) bonus depreciation and §179 expense add-backs Enter interest and dividend income, to the extent included in federal taxable income, from obligations issued by the United States Use the table on line 89 to calculate the current deductions from government or its possessions/territories that are exempt from Ohio the prior year add-back amounts. Deduct: tax by federal law. ● 1/5 of prior year 5/6 add-backs, A comprehensive list of deductible interest and dividends can be ● 1/2 of prior year 2/3 add-backs, AND/OR found in Information Release IT 1992-01 – Exempt Federal ● 1/6 of prior year 6/6 add-backs, Interest Income. of applicable §168(k) bonus depreciation and §179 expense add- Examples of interest income that are not deductible: backs on a prior year’s IT 1041. The deduction must be taken ● Interest paid by the IRS on a federal income tax refund. in equal increments in consecutive tax years. If the deduction is ● Interest income from Fannie Maes or Ginnie Maes. missed in a taxable year, any unused portion from any given tax year is not eligible to be carried forward. Instead, the PTE would See R.C. 5747.01(S)(4). have to amend the prior years’ returns to claim the deduction. Line 33 – State and Municipal Income Tax Refunds To the extent this amount is apportionable, it should be included on Schedule VII. If the amount is Enter the amount of state and/or municipal income tax refunds ! apportionable, do not include on Schedule VIII. included in federal taxable income for the taxable year of this CAUTION return if the refunds relate to taxes previously claimed as itemized deductions on the decedent’s federal income tax return. Deduct only amounts that were added back by the trust/estate on See R.C. 5747.01(S)(9)(a). a prior year’s IT 1041. This deduction is available even if the asset is no longer owned by the trust/estate. Line 34 – Losses from an ESBT See R.C. 5747.01(S)(14) and (A)(18). Deduct the distributive share of loss from an S corporation if the loss has not been directly or indirectly deducted in computing the Line 40 – Repayment of Income Reported in a Prior Year trust’s federal taxable income Deduct amounts, described in section 1341(a)(2) of the Internal This amount is apportionable business income and Revenue Code, that the trust/estate repaid in the current tax year must be included on Schedule VII. Do not include that was received and included in federal taxable income in a ! on Schedule VIII. prior year if: CAUTION ● The trust/estate recognized the amount as income on the federal return in a prior year; Line 35 – Wage and Salary Expense Not Previously Deducted ● The trust/estate has not deducted this income on any other line on the Ohio income tax return for any tax year; AND Deduct the amount reported as work opportunity tax credit on the ● In the year the trust/estate recognized the income, it did not federal income tax return. qualify for either the Ohio resident or nonresident credit. See R.C. 5747.01(S)(5). See R.C. 5747.01(S)(10). Line 36 – Interest/Gains from Ohio Public Obligations Schedule III – Estate Credits Deduct interest income earned from Ohio public obligations and The credits listed on Schedule III are only available to an estate. Ohio purchase obligations if the interest income was included in the They correspond to the credits found on Ohio’s individual income federal taxable income. The trust/estate can also deduct any gains tax return (IT 1040). resulting from the sale or disposition of Ohio public obligations to the extent that the gain was included in the federal taxable income. Distribution of Credits. When calculating estate credits, do not include any credit amounts that are allocable to a beneficiary. This The trust/estate can also deduct income from a certain transfer includes credits based on income that is distributed to a beneficiary agreement or an enterprise transferred under that agreement if instead of being retained by the estate. the income was included in the federal taxable income. See R.C. 5747.01(S)(6), 5747.01(S)(7) and 5709.76. See R.C. 5747.01(S)(13). Line 37 – Refund or Reimbursements of a Prior Year Deduction Line 43 – Retirement Income Credit Deduct amounts included in the federal taxable income that To qualify for this credit, all of the following must be true: represent refunds or reimbursements of expenses that were ● The decedent must have received retirement income from a previously deducted on the federal 1041 return. Do not include any pension, profit sharing or retirement plan (such as traditional amounts shown on line 31. See R.C. 5747.01(S)(9)(a). IRAs, 401(k) plans); ● This income is included in the estate’s federal taxable income Federal Conformity Adjustments. Line 37 is also for federal (e.g. it was not distributed to any beneficiary); conformity adjustments, however, the trust/estate must make all ● This income was received on account of the decedent’s other required adjustments for this line. retirement; AND ● The decedent has not previously taken the Ohio lump sum For more information, see Ohio Conformity Updates at tax.ohio. retirement credit. gov. - 11 - |
Enlarge image | IT 1041 Rev. 12/22 Credit Amount Line 48 - Campaign Contribution Credit for Ohio Statewide Office or General Assembly Retirement Retirement income included in Estates’ taxable income An estate may claim this credit if the estate contributed money to Income Credit the campaign committee of a candidate for any of the following $ 0 – $ 500 0 Ohio offices: $ 501 – $ 1,500 $ 25 ● Governor / Lieutenant governor ● Secretary of state $ 1,501 – $ 3,000 $ 50 ● Auditor of state ● Treasurer of state $ 3,001 – $ 5,000 $ 80 ● Attorney general $ 5,001 – $ 8,000 $ 130 ● Chief justice of the Ohio Supreme Court ● Justice of the Ohio Supreme Court $ 8,001 or more $ 200 ● Ohio Board of Education The credit is based on the total retirement income included the ● Ohio Senate estate’s taxable income. ● Ohio House of Representatives The maximum credit per return is $200. The credit equals the amount contributed during the tax year up to $50 per return. Contributions to local candidates (such as city or See R.C. 5747.055(B). county officials) or federal candidates (such as President or U.S. Senator) do not qualify for this credit. Line 44 – Lump Sum Retirement Credit If the estate takes this credit, it cannot take the retirement 48a – Scholarship Donation Credit Note: income credit on this year’s return or any future return. To qualify for this credit, the estate must make a monetary donation To qualify for this credit, all of the following must be true: to an eligible scholarship granting organization (SGO). The credit ● The decedent must have received a total lump sum distribution equals the lesser of $750 or the total amount you donated to SGOs on account of retirement; during the tax year. For a list of eligible SGOs, see tax.ohio.gov/ ● The distribution must have come from a qualified pension, SGO. See also R.C. 5747.73 retirement or profit sharing plan; ● This income was included in the estate’s federal taxable income Line 49 – Vocational job credit and/or Ohio adoption credit (e.g. it was not distributed to any beneficiary); AND (adoption credit limit $10,000) ● The decedent has not previously claimed this credit. This Vocational Job Credit is granted by the Ohio Department of Use the Lump Sum Worksheet on page 23 to calculate this credit. Education (ODE). To claim the credit, attach a copy of the certificate from ODE that indicates the amount of the credit and the tax year See R.C. 5747.055(C). for which the credit is awarded. For more information about the requirements for the credit, visit education.ohio.gov. Line 45 – Senior Citizen’s Credit See R.C. 5747.057. To qualify for this credit, both of the following must be true: ● The decedent was at least 65 as of the date of death; AND To qualify for the Ohio Adoption Credit, the decedent must have ● The decedent has not previously taken the Ohio lump sum adopted, during the tax year, a child who was under the age of 18 distribution credit. and not his/her stepchild. The credit is equal to $50 per return. This credit is not related to or based on the calculation of the See R.C. 5747.055(F). federal adoption credit. Instead, the credit is the greater of $1,500 or the adoption-related expenses, capped at $10,000. For purposes Line 46 – Lump Sum Distribution Credit of this credit, “adoption-related expenses” include all of the following: Note: If the estate takes this credit, it cannot take the $50 senior ● Medical care expenses of the birth mother or child in connection with the pregnancy or birth; citizen credit on this year’s return or any future return. ● Legal fees, guardian ad litem fees, and court expenses in To qualify for this credit, all of the following must be true: connection with the adoption; ● The decedent was at least 65 as of the date of death; ● Adoption agency fees; AND ● The decedent must have received a total lump sum distribution ● Certain living expenses, not exceeding $3,000, for the birth mother from a qualified pension, retirement or profit sharing plan; that are incurred during pregnancy. ● This income was included in the estate’s federal taxable income The estate may claim one credit for each adoption. This credit is (e.g. it was not distributed to any beneficiary); AND nonrefundable; however, any unused portion can be carried forward ● The decedent has not previously claimed this credit for up to five consecutive years. Use the Lump Sum Worksheet on page 23 to calculate this credit. For more information, see tax.ohio.gov for FAQs (in the “Income- See R.C. 5747.055(G). Adoption Credit” topic). Line 47 – Child and Dependent Care Credit See also R.C. 5747.37 and 3107.055(C). To qualify for this credit the decedent must have claimed the federal “credit for child and dependent care expenses” on federal form Schedule IV – Estate Ohio Resident Credit 2441. See Child and Dependent Care Credit Worksheet on page 22. To determine the income taxes paid to another state or the District See R.C. 5747.054 of Columbia, the estate must use IT RCTE. See page 16 for the IT RCTE instructions. The credit equals the lesser of the income taxes paid to another state or the District of Columbia, or the portion of the Ohio tax liability - 12 - |
Enlarge image | IT 1041 Rev. 12/22 attributable to income taxed by another state. Nonresident estates Schedule VII – Apportioned Income for Trusts are not entitled to this credit. See R.C. 5747.05(B). Line 62 – Business Income and Qualifying Investment Income Enter the trust’s portion of Ohio taxable income (line 3) not included Schedule V – Estate Nonresident Credit on line 59 to the extent such income is either of the following: Nonresident estates should enter the portion of Ohio taxable income ● Modified Business income/loss: Income included in a trust’s on line 3 that is not apportioned or allocated to Ohio. Ohio taxable income after such taxable income is first reduced To determine the portion of the Ohio taxable income (IT 1041, line by the qualifying trust amount, if any. Electing Small Business 3) that is not apportioned or allocated to Ohio, the estate must use Trust (ESBT) income is apportionable to Ohio as modified form IT NRCE obtained at tax.ohio.gov. Include this form with the business income and is reported in Schedule VII. See R.C. IT 1041. 5747.01(AA)(1) and 5747.01(S)(13) See R.C. 5747.05(A),5747.20 5747.21, and R.C. 5747.231. ● Qualifying Income attributable to investment income/loss: transaction fees for the acquisition, ownership, or disposition Schedule E – Nonrefundable Business Credits of intangible property, including the: ● Loan fees; Use Schedule E to claim nonrefundable business credits. The trust/ ● Financing fees; estate may obtain Schedule E at tax.ohio.gov. ● Consent fees; ● Waiver fees; Trust/estate is only● Application fees; entitled to the portion of the Schedule E credit that relates to the retained ● Net management fees; ! earnings in the trust/estate. ● Dividend income; CAUTION ● Interest income; ● Net capital gains from the sale, exchange, or other See R.C. 5747.02(C)(3). disposition of intangible property; AND ● All types and classifications of income from distributive Schedule VI – Allocated Qualifying Trust Amounts shares of income from other PTEs. ● This list is not all inclusive. See R.C. 5747.012. Line 59 – Allocated Qualifying Trust Amounts See R.C. 5747.01(AA)(1) and 5747.013 A trust’s income is a “qualifying trust amount” if all of the following are true: Schedule VIII – Allocated Nonbusiness Income for Trusts ● The income is included in the trust’s Ohio taxable income (IT 1041, line 3); Line 65 - Resident Trusts: Trust’s Portion of Ohio Taxable ● The income is a capital gain or loss from the sale, exchange or other disposition of either an ownership interest in, or debt Income obligations of, a qualifying investee; Resident trusts enter the trust’s Ohio taxable income (line 3) not ● The trust owns at least 5% of the qualifying investee at any reported on lines 59 or 62. time during the 10-year period ending on the last day of the trust’s tax year; AND Line 66 - Nonresident Trusts: Trust’s Portion of Ohio Taxable ● The book value of the qualifying investee’s physical assets is available. Income A “qualifying investee” is any entity in which a trust has an ownership Nonresident trusts enter the following types of nonbusiness income interest, or an entity or unit of government in which the trust owns to the extent included in the trust’s Ohio taxable income (line 3) and debt obligations. Information is “available” if it can be obtained by not reported on lines 59 or 62: the trust’s due date for filing the IT 1041. ● Capital gains or losses from the sale, exchange or transfer of Most income is not a qualifying trust amount. Instead, it is modified Ohio real property and/or Ohio-based tangible personal property; business income, qualifying investment income, or modified ● Rents and royalties from Ohio real property and/or tangible personal property used in Ohio, nonbusiness income. ● Patents and copyright royalties used by the payor in Ohio; AND ● Ohio Lottery Commission winnings and gains and/or losses See R.C. 5747.01(AA)(2),(5) and (6) and 5747.011. See also T. from the sale or transfer of such winnings. Ryan Legg Irrevocable Trust v. Testa, 2016-Ohio-8418. Note: If distributive share is business income/loss from a pass- Line 60 - Percentage of Closely Held Investee’s Physical Assets through entity, use Schedule VII. Located Within Ohio See R.C. 5747.01(AA)(3). The percentage is calculated as follows: Schedule IX – Tax Credit for Resident Trusts Net book value of the qualifying investees physical assets in Ohio Note: The credit must be taken prior to taking any other credit. Net book value of the qualifying investees physical assets everywhere To determine the income taxes paid to another state or the District of Columbia, the estate must use IT RCTE. See page 16 for the IT “Net book value” is the asset’s cost minus its accumulated RCTE instructions. depreciation. If the qualifying trust amount from capital gains/losses was recognized due to the sale, exchange or other disposition of The credit equals the lesser of the income taxes paid to another more than one investment, then the fiduciary must make a separate state or the District of Columbia, or the portion of the Ohio tax calculation for each gain or loss. liability attributable to nonbusiness income taxed by another state. Nonresident portions of the trust are not entitled to this credit. Note: If the qualifying investee is a member of a qualifying controlled group, as defined in R.C. 5733.04(M), then special rules apply for See R.C. 5747.02(C)(2). purposes of calculating the Ohio ratio. Line 68 – Portion Taxed by Another State See R.C. 5747.01(AA)(5) Enter the portion of the resident trust’s allocated nonbusiness income (line 65) subjected to tax by another state or in the District of Columbia. - 13 - |
Enlarge image | IT 1041 Rev. 12/22 Example: The Pat Smith Trust, a resident trust, has modified Line 75b – Property Rented Ohio taxable income of $75,000 from dividends. The dividends are modified nonbusiness income. The tax shown on line 8 is Within Ohio: Enter the average value of all Ohio business property $2,061. The trust paid $1,100 to another state based on $25,000 rented by the trust during the tax year. of taxable income, which was reported to that state. The trustee would calculate the resident tax credit as follows: Total Everywhere: Enter the average value of all business property Line 68 $25,000 Line 72 $688 rented by the trust during the tax year. Line 69 $2,061 Line 73 $1,100 Note: Business property rented by the trust is valued at eight times the Line 70 $75,000 Line 74 $688 net annual rental rate (annual rental expense less sub-rental receipts). Line 71 0.0275 Payroll Factor Schedule X - Apportionment Factors The payroll factor is the ratio of: The three factors comprising the total weighted apportionment ratio Total compensation in Ohio are 20% property, 20% payroll, and 60% sales. Total compensation everywhere NOTE: If the “total everywhere” amount of any factor is zero, the “Compensation” means any form of remuneration paid to an weights of the remaining factors must be proportionately increased employee for personal services. Compensation does not include to result in a total weighted ratio of 100%. any of the following: Example: If the entity has no payroll, it must reweight its property ● Amounts paid to employees for services unrelated to a trade or factor to 25% and its sales factor to 75%. business; ● Amounts reclassified as a distributive share of income from a If a trust owns an interest in a PTE, when calculating its pass-through entity under R.C. 5733.40(A)(7); AND apportionment ratio it must include its proportionate share of the ● Amounts paid to employees who are primarily engaged in other PTE’s “Within Ohio” portion and the “Total Everywhere” portion qualified research. of property, payroll and sales. These amounts are reported by the Note: Compensation paid to certain employees at an urban job PTE in the “Entity Apportionment Percentage” section of the IT K-1 and enterprise zone facility, for which Ohio has issued a Tax issued to the trust. Incentive Qualification Certificate, should be included only in total compensation everywhere. NOTE: A PTE may request, in writing with a timely filed original or amended return, an alternative form of apportionment instead See R.C. 5747.013(B)(2). of the method listed above. Such request is only valid if approved by the Department. Line 76 – Payroll Within Ohio: Enter the total compensation paid in Ohio during the See R.C 5747.01(AA)(4),5747.013(B) and 5747.231 tax year. Compensation is paid in Ohio if any of the following apply: Property● The employee’s job is entirely in Ohio; Factor ● The employee’s job is primarily in Ohio with only incidental work The Property Factor is the ratio of: outside Ohio; ● The employee performs services in Ohio and either the Average value of property in Ohio headquarters, or, if no headquarters exists, the place from which Average value of property everywhere the service is directed or controlled, is in Ohio; AND/OR ● The employee is a resident of and performs some services in “Property” includes any real and tangible personal property that is Ohio, and the headquarters or the place from which the service owned, rented, subrented, leased and/or subleased in the course of is directed or controlled is not in any state in which some part of a trade or business by the trust or other PTEs owned by the trust. the service is performed. Property does not include the following: Compensation paid to any employee of a common or contract motor ● Construction in progress; carrier who performs regularly assigned duties in more than one ● Property not used in a trade or business; state should be assigned to Ohio by the ratio of mileage traveled by ● Property for which Ohio has issued an air, noise, or industrial the employee in Ohio to the total mileage traveled by the employee water pollution control certificate; AND everywhere during the taxable year. ● Property used exclusively during the tax year for qualified research. Mileage Traveled by Employee in Ohio Note: The original cost of qualifying improvements to property Total Mileage Traveled by Employee Everywhere in an enterprise zone, for which Ohio has issued a Tax Incentive Total Everywhere: Enter the total compensation paid everywhere Qualification Certificate, should only be included in Total Everywhere. during the tax year. The “average value” of business property is calculated by averaging See R.C. 5747.013(B)(2). the total value of all applicable property owned or rented at the beginning and end of the tax year. Sales Factor See R.C. 5747.013(B)(1)(b). The sales factor is a ratio of: Line 75a – Property Owned Sales in Ohio Within Ohio: Enter the average value of all Ohio property owned Sales everywhere by the business during the tax year. “Sales” includes gross business receipts such as: Total Everywhere: Enter the average value of all property owned ● Receipts from the sale of real property, tangible personal by the business during the tax year. property, or services; ● Receipts from rents and royalties from real and tangible Property owned by the business is valued at its original cost. personal property; OR ● Receipts from the transfer of or the right to use intellectual property such as trademarks, trade names, patents, and copyrights - 14 - |
Enlarge image | IT 1041 Rev. 12/22 “Sales” does not include any of the following: Schedule XII - Refundable Business Credits ● Receipts from the transfer of real or tangible personal property that is either a capital asset or an Internal Revenue Code Note: The trust/estate can only claim the distributive share of direct section 1231 asset; AND and indirect refundable business credits attributable to the trust/ ● Receipts from sales to certain public utilities, insurance estate’s retained earnings. Credits related to income distributed by companies, and financial institutions described in R.C. the trust/ estate must be claimed by the beneficiary. 5747.013(B)(3). See R.C. 5747.02(C)(3) Note: Income amounts excluded from the sales factor may still be considered business income under Ohio law. R.C. 5747.013. Line 81 – Motion Picture and Broadway Production Credit Line 77 – Sales This credit is granted by the Ohio Department of Development (ODOD). To claim the credit, the trust/estate must attach a copy of Within Ohio: Enter gross receipts from sales within Ohio during the the certificate from ODOD that indicates the amount of the credit and tax year. Sales within Ohio include all of the following: the tax year for which the credit is awarded. Additionally, if this credit ● Receipts from sales of tangible personal property, less returns is based on the trust’s/estate’s ownership of a PTE that holds the and allowances, to the extent the property was received by the certificate, the trust/estate must also include, when filing its return, purchaser in Ohio; AND documentation of the portion of the credit to which the trust/estate ● Receipts from sales, other than tangible personal property if: is entitled. This amount can be refunded, in whole or in part, to ● The income-producing activity is performed entirely within the extent that it exceeds the trust’s/estate’s total Ohio tax liability. Ohio; OR ● The income-producing activity is performed both within For additional information about the requirement for this credit, visit and without Ohio and a greater proportion of the income- the Ohio Department of Development’s website at development. producing activity is performed within Ohio than in any ohio.gov, or call 1-800-848-1300. other state, based on cost of performance. See R.C. 5747.66. If the income-producing activity involves the performance of personal services both within and without Ohio, the services performed in Line 82 – Refundable Job Creation Credit and Job Retention each state will constitute a separate income-producing activity. Credit In such case the gross receipts for the performance of services These credits are granted by the Ohio Department of Development attributable to Ohio shall be measured by the ratio that the time spent (ODOD). To claim the credit, the trust/estate must attach a copy of in performing such services in Ohio bears to the total time spent the certificate from ODOD that indicates the amount of the credit and in performing such services everywhere. Time spent in performing the tax year for which the credit is awarded. Additionally, if this credit services includes the amount of time expended in the performance of is based on the trust’s/estate’s ownership of a PTE that holds the a contract or other obligations that gives rise to such gross receipts. certificate, the trust/estate must also include, when filing its return, documentation of the portion of the credit to which the trust/estate Personal service not directly connected with the performance of is entitled. This amount can be refunded, in whole or in part, to the contract or other obligations (for example, time expended in the extent that it exceeds the trust’s/estate’s total Ohio tax liability. negotiating the contract) is excluded from the computation. For additional information about the requirements for this credit, see The term “income-producing activity” means, with respect to each the Ohio Department of Development’s website at development. separate item of income, the transaction and activity directly ohio.gov, or call 1-800-848-1300. engaged in by the taxpayer in the regular course of its trade or business for the purpose of obtaining gains or profits. Such activity See R.C. 5747.058(A),122.171 , and formerR.C. 122.171(B). does not include transactions and activities performed on behalf Line 83 – Pass-Through Entity Credit of the taxpayer, such as those conducted on its behalf by an independent contractor. This credit is for taxes paid on the trust’s/estate’s behalf by a PTE on its IT 4708, IT 4738, or IT 1140. To claim this credit, attach a The term “cost of performance” means direct costs determined in copy of the IT K-1 issued to this trust/estate by the PTE reporting: a manner consistent with generally accepted accounting principles ● Income taxes paid by the PTE (IT K-1, line 3); AND/OR and in accordance with accepted conditions or practices in the ● Indirect PTE credits (IT K-1, line 4) from taxes paid by a PTE taxpayer’s trade or business. For purposes of this term, receipts the trust/estate indirectly owns. from rental property are sitused to this state if the property (i) is used entirely in this state or (ii) is used more in this state than in If the trust/estate does not have an IT K-1, the trust/estate must any other state. provide a narrative and/or diagram, including ownership percentages Note: For tangible personal property, where the property is “received and FEINs, detailing the ownership structure of the PTEs. by the purchaser” is not the same as where the purchaser takes physical or legal possession. Instead, it is considered “received” See 5747.08(I), 5747.059, and 5747.39. where it is ultimately used by the purchaser. Line 84 – Venture Capital Credit Total Everywhere: Enter the gross receipts from sales everywhere This credit is granted by the Ohio Department of Development during the tax year. (ODOD). To claim the credit, the trust/estate must attach a copy of See R.C 5747.013(B)(3). the certificate from ODOD that indicates the amount of the credit and the tax year for which the credit is awarded. Additionally, if this credit Schedule XI - Net Payment Worksheet is based on the trust’s/estate’s ownership of a PTE that holds the certificate, the trust/estate must also include, when filing its return, Note: Please do not include refundable business credits on this documentation of the portion of the credit to which the trust/estate schedule. is entitled. This amount can be refunded, in whole or in part, to The trust/estate is only entitled to the portion of the Schedule E the extent that it exceeds the trust’s/estate’s total Ohio tax liability. credit that relates to the retained earnings in the trust/estate. See For additional information about the requirement for this credit, see R.C. 5747.02(D)(3). the Ohio Department of Development’s website at development. ohio.gov, or call 1-800-848-1300. See R.C. 5747.80. - 15 - |
Enlarge image | IT 1041 Rev. 12/22 Line 85 – Historic Preservation Credit Column E: Divide the amount in Column B by Column D. This is the This credit is granted by the Ohio Department of Development, “annual depreciation deduction amount” for the deduction period. (ODOD). To claim the credit, the PTE must attach a copy of the Report the amount on line 39. certificate from ODOD that indicates the amount of the credit and Note: In a given tax year, the trust/estate may need to report a the tax year for which the credit is awarded. Additionally, if this mixture of add-back ratios on Schedule XIII, due to investment in credit is based on the PTE’s ownership of another PTE that holds multiple PTEs. In this scenario, check the 5/6 box and provide an the certificate, the PTE must also include, when filing its return, explanation of the ratio. The trust/estate may wish to attach this documentation of the portion of the credit to which the PTE is explanation to future years’ returns. entitled. For credits approved after September 13, 2022 and before July 1, 2024, the maximum annual credit amount was increased Follow the same procedure for the beneficiaries of the Trust on the from $5,000,000 to $10,000,000 per taxable year, and the entire IT K-1 under Depreciation Information and fill out the Supplemental credit can be taken as a refundable credit. Information portion. For additional information about the requirements for this credit Schedule XIV - Beneficiary Schedule or the new enhanced credit visit development.ohio.gov, or call 1-800848-1300. Include all resident and nonresident beneficiaries of the estate or trust. See R.C. 5747.76 and 149.311(I). IT RCTE - Ohio Trust/Estates Resident Credit Schedule XIII - IRC §168(k) Bonus Depreciation and §179 Trusts/estates must use the IT RCTE to calculate their resident credit. Expense Add-back Schedule The resident credit is equal to the lesser of the total income taxes Prior tax year add-back amount and add-back ratio. paid on its income or: Trusts: Line 88 - Total Current Year §168k Bonus Depreciation and The portion of the trust’s modified Ohio nonbusiness income that §179 Expense Add-Back was earned while a resident of Ohio and subjected to income tax by another state or the District of Columbia. Total current year add-back from line 28 ADD-BACK Estates: The portion of the estate’s Ohio taxable income that was earned while Source of §179 §168(k) Add-back Add-back a resident of Ohio and subjected to income tax by another state or Depreciation Add-back Amount Ratio (2/3, Amount the District of Columbia. Amount 5/6, 6/6) For both trusts and estates, “state” means only one of the 50 United States of America. State does not include any country, province, or city. Additionally, trusts/estates cannot claim a resident credit for income earned in a state without a trust/estate income tax. Thus, those states are not listed on form IT RCTE. Total add-back for tax year: Include this form with the IT 1041 and retain a copy for the trust’s/ estate’s records. Line 89 - Prior Years Add-Back Amount and Applicable Add- Back Ratio Column A – Income Taxed Use this table to calculate the current deductions from prior year Trusts: For each state or the District of Columbia for which the trust add-back amounts and applicable ratios and report on line 39. filed an income tax return, enter the portion of the trust’s modified Ohio nonbusiness taxable income that was subjected to income tax §168(k) Bonus Depreciation and §179 Expense Deduction Worksheet on such return. A B C D E Add-back Tax Year Source of Depreciation Ratio (2/3, 5/6, Deduction Annual Estates: For each state or the District of Columbia for which the Depreciation Add-back 6/6) Period Depreciation estate filed an income tax return, enter the portion of the estate’s Amount Deduction Amount Ohio taxable income that was subjected to income tax on such return. 2021 For both trusts and estates, amounts deducted on Ohio Schedule 2020 II (for example, certain municipal and state income tax refunds) are 2019 not included in Ohio taxable income, and thus are not eligible to be included on this line. 2018 2017 Column B – Tax Paid For each state or District of Columbia for which the trust/estate filed an Column B: Enter the depreciation expense add-back. income tax return, enter any income taxes paid for the current tax year. Column C: Enter the ratio used (5/6, 2/3, or 6/6) to calculate the depreciation expense add-back. Note: Do not include taxes paid to any country, province, or city. Column D: Enter the deduction period based on the following chart: Add-back Ratio Deduction Period 5/6 5 Years 2/3 2 Years 6/6 6 Years - 16 - |
Enlarge image | IT 1041 Rev. 12/22 IT NRCE - Ohio Nonresident Credit Calculation These instructions are used to complete the form IT NRCE and line 54 of the Ohio IT 1041. Estates must use the IT NRCE to calculate the nonresident portion Line 6 – Lottery and Casino Winnings of their federal taxable income. This amount is used to calculate the Ohio nonresident credit. Only nonresidents estates may use Enter lottery prizes and casino winnings in Column B that were: this form. ● Paid by the Ohio lottery commission; OR ● Paid by a casino located in Ohio Include this form with the completed IT 1041 and retain a copy for record. If the tax preparation software allows for PDF attachments, Also enter any income from the sale of a lottery prize issued by the the trust/estate should include a copy of this form. Ohio lottery commission. Individuals should use the IT NRC instead of the IT NRCE to cal- See R.C. 5747.20(A), (B)(5) and (B)(7). culate their Ohio nonresident credit. Both forms are available at tax.ohio.gov. Line 8 – Net Additions from Ohio Schedule II Section I – Nonresident Credit Calculation Do not include any 168(k) and §179 depreciation expense add- All Ohio nonresident estates must complete Part A and Part B. back made on Ohio Schedule II. Such amounts are already included in the calculation of line 7. For Column A (Federal Amount), enter only the specified items of income to the extent they are included in the calculation of the Only include the portion of other Ohio Schedule II additions that federal taxable income. were: ● Paid or accrued and allocated to Ohio; OR Except for line 5, list only non-business income ● Related to Ohio activities amounts in column B. All Ohio business income ! should be listed on line 5 after completing See R.C. 5747.20(B)(6). CAUTION Sections II and III of this form. Line 9 – Net Deductions from Ohio Schedule II Line 1 – Nonbusiness Interest and Dividend Income Only include the portion of other Ohio Schedule II deductions that Enter interest and dividends paid or accrued and allocated to Ohio were: in Column B. See R.C. 5747.20(B)(6). ● Paid or accrued and allocated to Ohio OR ● Related to Ohio activities Line 2 – Nonbusiness Rent and Royalty Income Certain Ohio Schedule II deductions either do not affect the calcula- Enter rents and royalties in Column B that were received or derived: tion of the Ohio nonresident credit or are accounted for elsewhere ● From real property located in Ohio; on this form. ● From tangible personal property to the extent utilized in Ohio; OR ● From patents or copyrights to the extent they were utilized in Ohio Do not enter any amounts directly deducted on the following lines of Ohio Schedule II: Ohio law defines when tangible personal property, patents, and copyrights are “utilized in Ohio.” ● Line 33 – State or Municipal Income Tax Overpayments ● Line 39 – Ohio Depreciation Deduction See R.C. 5747.20(A), (B)(3) and (B)(4). See R.C. 5747.20(B)(6). Line 3 – Nonbusiness Capital Gain Income Line 10 – Income Distribution Deduction Enter capital gains and/or losses in Column B that: Deduct income distribution deduction utilized on page 1 of the ● Resulted from the transfer of real property located in Ohio; OR federal 1041 on Section I, Column A. ● Resulted from the transfer of tangible personal property that, when transferred, was located in Ohio Deduct income distribution deduction at the same ratio of Ohio in- See R.C. 5747.20(A) and (B)(2). come to Federal income on Section I, Column B based on amounts from lines 1-6. For more information on how to determine this Line 4 – Nonbusiness Other Income amount, see page 21. Enter other nonbusiness income reported on the federal return, and Example: An estate has $1,000,000 in business income. $100,000 paid or accrued and allocated to Ohio in Column B. is apportioned to Ohio. There is a $500,000 distribution made to the beneficiaries. Do not enter any income directly deducted on Ohio Schedule II, such as state and local tax refunds. $100,000 = 0.1 See R.C. 5747.20(B)(6). $1,000,000 Federal distribution deduction = $500,000 Ohio distribution deduction = $50,000 - 17 - |
Enlarge image | IT 1041 Rev. 12/22 Line 11 – Federal Taxable Income Deduction Section III – Business-Level Income & Deduct the total amount of federal allowable deductions utilized on Apportionment page 1 of the federal 1041 on Section I, Column A. Complete a separate Section III for each business having property, Deduct the total amount of federal allowable deductions at the payroll, and/or sales in Ohio. However, if an Ohio IT K-1 reporting same ratio of Ohio income to Federal income on Section I, Column income from a pass-through entity is attached with the IT NRCE, a B based on amount from lines 1-6. Section III does not need to be completed for that entity. For each Section III completed, you must include the name of estate, Example: An estate has $700,00 in nonbusiness income. $35,000 FEIN / SSN, and ownership percentage in the business, as well as is allocated to Ohio. the business’ name and FEIN (if applicable) in the spaces provided. There are $200,000 in deductions reported on the federal 1041. Part A $35,000 Calculate a separate apportionment ratio for each business listed = 0.05 in Section III. Ohio apportionment is based on a three factor, $700,000 weighted ratio. Federal distribution deduction = $200,000 The three factors are property and payroll, each weighted at 20%, Ohio distribution deduction = $10,000 and sales, weighted at 60%, for a total of 100%. However, if any fac- tor’s “total everywhere” is zero, the weights of the remaining factors Section II – Ohio Business Income must be proportionately increased so that the total remains 100%. List every business in which the entity held an ownership interest Example: ABC LLC is a single-member LLC with no employee during the tax year. If the entity has more than 20 businesses, in- payroll. In calculating its Ohio apportionment ratio, ABC LLC must clude additional page 2(s), with only lines 1-20 completed. Total all weight its property factor at 25% and its sales factor at 75%. businesses reported on the additional page 2(s) on line 21. If this business receives income from pass-through entities, its ap- For each business, enter: portionment ratio calculation must include the proportionate share of each lower-tiered entity’s property, payroll and sales. ● The total business income included on the federal return in Column A Line 1 – Property Factor ● The Ohio depreciation adjustment in Column B (from Section III, line 21) The property factor is the ratio of: ● The Ohio apportioned income in Column C (from Section III, line 17) Average value of property in Ohio Average value of property everywhere Each column is independently calculated for each business. Column A is not a total of Columns B and “Property” includes any real and tangible personal property that is ! C. owned, rented, subrented, leased and/or subleased in the course of CAUTION a trade or business. Property does not include any of the following: ● Construction in progress If you have an Ohio IT K-1 for a business, the entity must still list ● Property not used in a trade or business that business and check the “IT K-1” box. Additionally, the entity ● Property for which Ohio has issued an air, noise,or industrial must enter: water pollution control certificate AND ● The total business income included on the federal return in ● Property used exclusively during the tax year for qualified re - Column A search. ● The Ohio depreciation adjustment in Column B (from Ohio IT Note: The original cost of qualifying improvements to property in an K-1, line 1c) enterprise zone, for which Ohio has issued a Tax Incentive Qualifica- ● The Ohio apportioned income in Column C (from Ohio IT K-1, tion Certificate, should be included only in Column B. line 1a plus line 1b) The “average value” of business property is calculated by averag- Line 22 – Column Totals ing the total value of all applicable property owned or rented at the beginning and end of the tax year. Column A: This is the total of all business income reported on the federal return. See R.C. 5747.21(B) and 5733.05(B)(2)(a). Column B: This is the total of all Ohio apportioned depreciation Line 1(a) – Property Owned adjustments. The total may be a positive or negative number. Enter this amount on Section I, line 7. Column A: Enter the average value of all Ohio business property owned during the tax year. Column C: This is the total of all Ohio apportioned business income. Column B: Enter the average value of all business property owned It may be positive or negative. Enter the amount on Section I, line 5. during the tax year. Property owned by the business is valued at its original cost. - 18 - |
Enlarge image | IT 1041 Rev. 12/22 Line 1(b) – Property Rented ● Receipts from the transfer of real or tangible personal property that is either a capital asset or an Internal Revenue Code sec- Column A: Enter the average value of all Ohio business property tion 1231 asset AND rented during the tax year. ● Receipts from sales to certain public utilities, insurance compa - nies, and financial institutions described in R.C. 5733.05(B)(2)(c) Column B: Enter the average value of all business property rented during the tax year. Note: Income amounts excluded from the sales factor may still be considered business income under Ohio law. Property rented by the business is valued at eight times the net annual rental rate (annual rental expense less subrental receipts). See R.C. 5747.21(B) and 5733.05(B)(2)(c). Line 2 – Payroll Factor Column A: Enter gross receipts from sales within Ohio during the The payroll factor is the ratio of: tax year. Sales within Ohio include all of the following: ● Receipts from sales of tangible personal property, less returns Total compensation paid in Ohio and allowances, to the extent the property was received by the Total compensation paid everywhere purchaser in Ohio ● Receipts from services to the extent the purchaser ultimately “Compensation” means any form of remuneration paid to an em- used or received the benefit of the services in Ohio ployee for personal services. Compensation does not include any ● Rents and royalties from tangible personal property to the extent of the following: the property was used in Ohio ● Amounts paid to employees for services unrelated to a trade ● Receipts from the transfer of certain intellectual property to the or business extent the property was used in Ohio ● Amounts reclassified as a distributive share of income from a ● Receipts from the right to use certain intellectual property in Ohio pass-through entity under R.C. 5733.40(A)(7) AND ● Receipts from the sale of real property located in Ohio AND ● Amounts paid to employees who are primarily engaged in quali- ● Rents and royalties from real property located in Ohio fied research Note: For tangible personal property, where the property is “received Note: Compensation paid to certain employees at an urban job and by the purchaser” is not the same as where the purchaser takes enterprise zone facility, for which Ohio has issued a Tax Incentive physical or legal possession. Instead, it is considered “received” Qualification Certificate, should be included only in Column B. where it is ultimately used by the purchaser. See R.C. 5747.21(B) and 5733.05(B)(2)(b). See R.C. 5733.05(B)(2)(c)(i) and (ii). Column A: Enter the total compensation paid in Ohio during the Column B: Enter the gross receipts from sales everywhere during tax year. Compensation is paid in Ohio if: the tax year. ● The employee’s job is entirely in Ohio ● The employee’s job is primarily in Ohio with only incidental work Line 4 – Ohio Apportionment Ratio outside Ohio ● The employee performs services in Ohio and either the head- The amount on this line represents the Ohio apportionment ratio for quarters, or, if no headquarters exists, the place from which the this business. This is used in Parts B and C to determine: service is directed or controlled, is in Ohio OR ● Income apportioned to Ohio AND ● The employee is a resident of and performs some services in Ohio, and the property to the extent the property was used in Ohio ● Ohio apportioned depreciation adjustments from Ohio Schedule II. Line 3 – Sales Factor Part B The sales factor is the ratio of: For each Section III completed, enter only amounts that are both included in the calculation of the federal adjusted gross income Total sales in Ohio and are “business income” under Ohio law. Remember, because of differences between federal and Ohio law, some amounts reported Total sales everywhere as business income on the federal return may not be business income on this schedule. Do not simply list the amounts from “Sales” includes gross business receipts such as: the federal return. ● Receipts from the sale of real property, tangible personal prop- erty, or services For more information on how Ohio defines business income and ex- ● Receipts from rents and royalties from real and tangible personal amples of business income, see page 13. See also R.C. 5747.01(B) property OR and 5733.40(A)(7). ● Receipts from the transfer of or the right to use intellectual prop- erty such as trademarks, trade names, patents, and copyrights Line 5 – Schedule B, Interest and Ordinary Dividends “Sales” does not include: Enter taxable interest and ordinary dividends reported on federal Schedule B that qualify as business income. ● Interest and dividends ● Receipts from the transfer of intangible property other than Line 6 – Schedule C, Profit or Loss from Business trademarks, trade names, patents, copyrights or other similar intellectual property Enter the net profit or loss from the business reported on federal Schedule C. Show a business loss as a negative number. - 19 - |
Enlarge image | IT 1041 Rev. 12/22 Line 7 – Schedule D, Capital Gains and Losses Line 15 – Total R.C. 5747.212 Income Enter capital gains or losses reported on federal Schedule D that Enter any R.C. 5747.212 income or loss included in the federal qualify as business income. Show a net capital business loss as a adjusted gross income. “R.C. 5747.212 income” is gain or loss negative number. resulting from the transfer of an ownership interest in a closely held business having nexus with Ohio. Show the amount as a negative Do not include any amounts that represent a R.C. 5747.212 gain number if the amount was a loss. or loss. Instead, include those amounts on line 15. Line 16 – R.C. 5747.212 Income Apportioned to Ohio Line 8 – Schedule E, Supplemental Income and Loss R.C. 5747.212 amounts are apportioned differently than other Enter the net business income or loss reported on federal Schedule business income. For additional information on how to apportion E. Show a net business loss as a negative number. Do not include these amounts, see R.C 5747.212 as well as Corrigan v. Testa, any guaranteed payments on this line, even if included on 2016-Ohio-2805. federal Schedule E. Enter the Ohio portion of the R.C. 5747.212 amount entered on line Line 9 – Guaranteed Payments, Compensation, and/or Wages 15. Show a loss as a negative number. Include the apportionment calculation with this form. If this business is a pass-through entity in which the entity has at least a 20% direct or indirect ownership, enter any guaranteed Line 17 – Ohio Apportioned Income payments or compensation paid to the entity by another entity, or a professional employer organization on its behalf. The amount on this line represents the Ohio portion of the income from this business. Enter this amount in Section Note: “Indirect” ownership does not include beneficial or construc- II, Column C of the line corresponding to this business. tive ownership via Internal Revenue Code attribution rules. Part C Line 10 – Schedule F, Profit or Loss from Farming Line 18 – Ohio Depreciation Add-back Enter the net profit or loss from farming reported on federal Schedule F. Show a net business loss as a negative number. Enter any portion of the §168(k) bonus depreciation and §179 expense: Line 11 – Other Business Income and/or Federal Conformity Additions ● That was reported as an Ohio Schedule II addition AND ● That is attributable to this business. Enter any business income included in the federal adjusted gross income that was not entered on lines 5 through 10. Include on Line 19 – Ohio Depreciation Deduction this line any amounts reported on the federal 4797 that constitute business income. Enter any portion of the deduction for prior year §168(k) bonus depreciation and §179 expense add-backs: Also, enter any federal conformity additions reported on Ohio • That was reported as an Ohio Schedule II deduction AND Schedule II related to this business. • That is attributable to this business Line 12 – Other Business Deductions and/or Federal Confor- This amount is calculated using the current year’s Ohio Schedule mity Deductions A. Do not use an amount from a prior year’s filing. Enter any business deductions included in the federal adjusted gross Line 21 – Ohio Apportioned Depreciation income that were not entered on lines 5 through 10 of this section. Include on this line any amounts reported on the federal 4797 that The amount on this line represents the Ohio portion of the Ohio constitute business loss. Schedule A depreciation adjustment from this business. Enter this amount in Section II, Column B of the line corresponding to this Also, enter any federal conformity deductions reported on Ohio business. Schedule II related to this business. - 20 - |
Enlarge image | IT 1041 Rev. 12/22 Matching Expense and Loss Amounts and Distribution Deductions Against Income and Gain For use when calculating the portion of a fiduciary’s expenses, losses, and distributions deduction related to its income. The fiduciary should directly match items of income and gain with any directly related expenses and losses. (A) Rental Activity For amounts that the fiduciary cannot directly match to items of Rents $ 530,000 income and gain, the fiduciary should proportionately assign Less: Depreciation expense - 100,000 those expenses and distributions. Generally, the basis for assign- Real estate taxes and payroll expenses - 25,000 ing expenses, losses and distributions will be the relative income Attorney fees (for lease preparations) - 5,000 or gain related to each activity . Tentative apportionable profit from rental Example #1 - Assigning Direct Distributions activities (business income) $ 400,000 The trust document directs the fiduciary to distribute to Lee, a ben- eficiary, 75% of the yearly profit from rental activities. (B) Portfolio Income ● The profit from these rental activities is $100,000 of business income. Dividends, interest and net capital gains $ 301,000 ● The trust had no other income and the only distribution to Lee Less: Investment advisor fees - 1,000 from the trust was $75,000. Tentative profit from “portfolio” income The fiduciary must reduce the trust’s rental profit by the distribution (nonbusiness income) $ 300,000 deduction attributable to the rental profit (in this example, 75% of the rental activity profit). So the amount to be shown on Schedule VII, line 62, will be $25,000. Total income excluding $70,000 indirect expense is $700,000. Example #2 - Assigning Direct and Indirect Distributions, Expenses and Losses Calculate the portion of $70,000 indirect expense for each income category as follows: The Trust has the following amounts listed on its Federal 1041: Gross rent $530,000 (A) Rental Activity (Schedule VII): Dividend income 200,000 (A) Divide by total income $700,000 excluding indirect expense Interest Income 41,000 (B) of $70,000: Net capital gain (stocks and bonds) 60,000 (B) Rental property depreciation expense - 100,000 (B) $ 400,000 = .571428 Rental property real estate taxes and related $700,000 payroll expenses - 25,000 (A) Attorney fees (lease preparation) - 5,000 (A) Multiply: Investment advisor fees (stocks & bonds) - 1,000 (B) $ 70,000 X .571428 = $40,000 Fiduciary fees (based upon profit) - 10,000 (C) Distribution deduction (discretionary) - 60,000 (C) Rental income - assigned rental expense Taxable income per IRS form 1041 $ 630,000 $400,000 - $40,000 = $360,000 Additionally, assume the following: Portfolio Income (Schedule VIII): • The rental profit constitutes business income; Divide by total income $700,000 excluding indirect expense • All other income and gain constitute nonbusiness income; of $70,000: • There are no “Schedule II” Ohio adjustments (so Ohio taxable income equals federal taxable income); AND $ 300,000 = .428571 • There are no amounts to report on IT-1041 Schedules VI or VII; AND $700,000 • Income from the federal schedule is categorized as follows: (A) = Rental Activity Multiply: (B) = Portfolio Income $ 70,000 X .428571 = $30,000 (C) = Indirect Expense and Deductions Portfolio income - assigned portfolio expense The total indirect expense and deductions for this trust are $70,000. $300,000 - $30,000 = $270,000 The expenses to the specific income categories are calculated is as follows: - 21 - |
Enlarge image | IT 1041 Rev. 12/22 Matching Allocation Based on Distributions Made This guide is useful when calculating credits for a trust/estate when distributions are made. The fiduciary must split credits between the trust/estate and its Example #3 - Partial distribution based on type of income beneficiaries based on the fiduciary’s retained earnings and distri- The trust is an investor in a pass-through entity (PTE). The trust butions to its beneficiaries. The proportionate share of the credits receives: must follow the distribution to the beneficiaries of the trust or estate. ● A federal K-1 showing $200,000 of PTE income. See R.C. 5747.02(C)(3), R.C. 5747.08(I) and R.C. 5747.059 ● An IT K-1 showing $17,000 in “Ohio tax paid on behalf of this investor/beneficiary (net of overpayments)”. Example #1 - Full distribution of income ● A capital gain of $50,000 from its own investment of trust assets. An estate receives a W2 reporting $100,000 of income and $1,000 of Ohio withholding. The income is included on the estate’s federal The income is included on the trust’s federal 1041 as “adjusted 1041 as “adjusted total income” but is then deducted as an “income total income”; $200,000 is then deducted as an “income distribution distribution deduction”. The income was distributed to the estate’s deduction”. The income was distributed to the trust’s sole benefi - sole beneficiary, an individual. ciary, an individual. Because 100% of the income is distributed to the estate’s ben- Because this trust has income from multiple sources, the amount of eficiary, the beneficiary is entitled to 100% of the $1,000 of Ohio the distribution of the credit depends on what income was retained, withholding when filing the IT 1040. The estate cannot claim the and what income was distributed by the trust. credit; the estate should issue an IT K-1 to the beneficiary reflect- (A) If the trust distributes the $200,000 of income from the PTE and ing the withholding. retains the $50,000 capital gain: Example #2 - Partial distribution of income ● The beneficiary is entitled to claim 100% of the $17,000 PTE A trust receives a 1099 reporting $150,000 of income and $3,000 credit on the individual’s IT 1040. of Ohio withholding. The income is included on the trust’s federal ● The trust is not entitled to the PTE credit on its IT 1041. 1041 as “adjusted total income” and $50,000 is deducted as an “income distribution deduction”. The income was distributed to the (B) If the trust distributes $150,000 of income from the PTE and the trust’s sole beneficiary, an individual. $50,000 capital gain, and retains the remaining $50,000 of income from the PTE: Because 1/3rd of the income is distributed to the trust’s beneficiary, the beneficiary is entitled to 1/3rd of the $3,000 of Ohio withholding ● The beneficiary is entitled to 75% of the $17,000 PTE credit when filing the IT 1040. The trust can claim 2/3 of the $3,000 with- ($12,750) on the individual’s IT 1040. ● The trust is entitled to 25% of the $17,000 PTE credit ($4,250) holding when filing the IT 1041. The trust should issue an IT K-1 to on its IT 1041. The trust should issue an IT K-1 to the beneficiary the beneficiary reflecting the 1/3 withholding. reflecting the indirect PTE credit. Child and Dependent Care Credit Worksheet 1. Enter your Ohio taxable income, IT 1041 line 3 ...................................................................................... 1. If line 1 is $40,000 or more, STOP. You do not qualify for this credit. 2. Enter the amount on your federal form 2441, line 9c ................................................................................2. 3. Enter 25% of the amount on your federal form 2441, line 11 ....................................................................3. 4. If line 1 of this worksheet is less than $20,000, enter the amount from line 2. If line 1 is equal to or greater than $20,000 but less than $40,000, enter the amount from line 3. This is your credit. Enter on line 47 of the IT 1041. ................................................................................. 4. - 22 - |
Enlarge image | IT 1041 Rev. 12/22 Lump Sum Retirement Credit Worksheet Do not include any retirement income that has been deducted or otherwise excluded from federal adjusted gross income or Ohio adjusted gross income. 1. Enter all retirement income included in your Ohio taxable income (Ohio IT 1041, line 3) ........................1. 2. Using Table 1 below, enter the multiple corresponding to the lump sum recipient’s age..........................2. 3. Divide line 1 by line 2................................................................................................................................3. 4. Using Table 2 below, enter the retirement income credit based on the amount on line 3.........................4. 5. Line 2 times line 4. This is your lump sum retirement credit. Enter on line 44 of IT 1041 ........................5. If line 5 is greater than tax liability, IT 1041 line 8, continue to lines 6a-c. Otherwise, stop here. 6a. Line 5 minus tax liability on line 8 of IT 1041 .........................................................................................6a. 6b. Subtract 1 from the amount on line 2......................................................................................................6b. 6c. Divide line 6a by line 6b. This is your lump sum retirement credit for future tax years...........................6c. Line 1: "Retirement income" means retire- Line 2: Use the recipient’s age as of the Do not round. ment benefits, annuities, or distributions last day of the tax year (generally, Decem- that are made from or pursuant to a pen- ber 31). Line 6c: Report this amount in each subse- sion, retirement, or profit-sharing plan. Ad- quent tax year as your lump sum retirement ditionally, these amounts must have been Line 6: If your lump sum retirement credit credit. received on account of retirement and must is greater than your tax liability, complete be included in your Ohio taxable income. lines 6a through 6c to calculate your lump sum retirement credit for future tax years. Do not include any of the following: ● Rollovers from one retirement plan into Line 6b: Subtract 1 from the amount you another that are not included in your fed- entered on line 2 of this worksheet. For ex- eral adjusted gross income, ample, if your multiple on line 2 was 19.2, ● Any Social Security benefits. you would enter 18.2 (19.2 - 1) on this line. Lump Sum Distribution Credit Worksheet 1. Using Table 1 below, enter the multiple corresponding to the lump sum recipient’s age..........................1. 2. Line 1 times $50. This is your lump sum distribution credit. Enter on the Ohio IT 1041 line 6 ............................................................................................................................2. Line 1: Use the recipient’s age as of the last day of the tax year (generally, December 31). Remember, this credit is not available to individuals younger than 65. Table 1 Table 2 Age Multiple Age Multiple Age Multiple Age Multiple Age Multiple Retirement income included in Retirement 31 51.2 48 34.9 65 20.0 82 8.4 99 2.8 Ohio adjusted gross income income credit 32 50.2 49 34.0 66 19.2 83 7.9 100 2.7 0 – $ 500 0 33 49.3 50 33.1 67 18.4 84 7.4 101 2.5 $ 501 – $ 1,500 $ 25 34 48.3 51 32.2 68 17.6 85 6.9 102 2.3 $ 1,501 – $ 3,000 $ 50 35 47.3 52 31.3 69 16.8 86 6.5 103 2.1 $ 3,001 – $ 5,000 $ 80 36 46.4 53 30.4 70 16.0 87 6.1 104 1.9 $ 5,001 – $ 8,000 $ 130 37 45.4 54 29.5 71 15.3 88 5.7 105 1.8 $ 8,001 or more $ 200 38 44.4 55 28.6 72 14.6 89 5.3 106 1.6 39 43.5 56 27.7 73 13.9 90 5.0 107 1.4 40 42.5 57 26.8 74 13.2 91 4.7 108 1.3 41 41.5 58 25.9 75 12.5 92 4.4 109 1.1 42 40.6 59 25.0 76 11.9 93 4.1 110 1.0 43 39.6 60 24.2 77 11.2 94 3.9 111 0.9 44 38.7 61 23.3 78 10.6 95 3.7 112 0.8 45 37.7 62 22.5 79 10.0 96 3.4 113 0.7 46 36.8 63 21.6 80 9.5 97 3.2 114 0.6 47 35.9 64 20.8 81 8.9 98 3.0 115 0.5 - 23 - |