Which TurboTax Do I Need to File a Return for a Trust?

Selecting the right version of TurboTax to file a trust tax return depends on whether the trust is classified as a grantor trust or a non-grantor trust. These two trust types have different tax reporting requirements, and TurboTax offers specific products to meet each need.

Grantor Trusts

If the trust is a grantor trust, the grantor (the person who created the trust) retains certain powers or ownership over the trust assets. For tax purposes, the IRS treats the trust’s income as if it belongs directly to the grantor.

• Filing Method: The trust itself does not file a separate income tax return. Instead, the grantor includes the trust’s income on their individual tax return (Form 1040).
• TurboTax Version Needed:
  Any TurboTax personal product that fits the grantor’s overall tax profile will work. Common options include:
  
  • TurboTax Premier – Best for investments, rental property, and general income.
  • TurboTax Self-Employed – Ideal for those with business or freelance income in addition to trust-related income.
• Note: Some grantor trusts may issue informational statements, but these do not require full trust tax returns like Form 1041.

Non-Grantor Trusts

Non-grantor trusts are treated as separate taxable entities. This means the trust itself must report income, claim deductions, and, if applicable, pay taxes or pass income through to beneficiaries.

• Filing Method: These trusts are required to file Form 1041, U.S. Income Tax Return for Estates and Trusts.
• TurboTax Version Needed:
  You must use TurboTax Business, which is specifically designed to handle:
  
  • Preparation and e-filing of Form 1041.
  • Creation of Schedule K-1s to report income distributed to each beneficiary.
• Platform Note: TurboTax Business is a Windows-only desktop software and is not available online or for Mac users.

Quick Summary

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Unsure which TurboTax version fits your trust return? Contact Watter CPA for expert guidance today.