Instructions For Estates And Trusts Income Tax Return (Form D-407a)

D-407A

2014

Instructions for Estates and Trusts

Web

Income Tax Return

11-14

North Carolina Department of Revenue

The references to line numbers and form numbers on federal income tax forms were correct at the time of printing. If they have changed and

you are unable to determine the proper line to use, please contact the Department of Revenue. These instructions are to be used as a guide

in the preparation of a North Carolina estates and trusts income tax return and are not intended to cover all provisions of the law.

NC K-1 must be provided to each beneficiary on or before the day on which the

Do not attach a copy of Federal Form 1041 or copies of K-1s to Form D-407.

estate or trust return is required to be filed.

If copies are needed, the Department will request them at a later date.

(A) Who must file Form D-407 - A fiduciary must file North Carolina Form

(K) N. C. Education Endowment Fund Contribution - You may contribute to the

D-407 for the estate or trust if he is required to file a federal income tax return for

N. C. Education Endowment Fund by making a contribution or designating some

estates and trusts and (1) the estate or trust derives income from North Carolina

or all of your overpayment to the Fund. To make a contribution, simply enclose

sources or (2) the estate or trust derives any income which is for the benefit of a

Form NC-EDU and your payment. You can access Form NC-EDU online at www.

resident of North Carolina. Exception: With respect to grantor trust returns, the

. If you owe additional tax on your return and would also like to make

Department of Revenue has access to the federal information contained in the federal

a contribution to the fund, you may write one check payable to “North Carolina

grantor trust returns. Therefore, a State grantor trust return is not required to be filed

Department of Revenue” and send with your return along with Form NC-EDU.

when the entire trust is treated as a grantor trust for federal tax purposes.

Write the contribution amount on Form NC-EDU. Your election to contribute to

the Fund cannot be changed after you file your return. Additional contributions

(B) Other returns to be filed by fiduciaries:

to the Fund may be made by mailing your donation directly to the North Carolina

(1) Returns for decedents - A personal representative must file an individual

Department of Public Instruction, Cash Collections, 6331 Mail Service Center,

income tax return, Form D-400, for the last taxable year of the decedent if the

Raleigh, North Carolina 27699-6331. Make check payable to “North Carolina

decedent had income that was sufficient to require the filing of an individual

Department of Public Instruction” and indicate either on the check or in an attached

income tax return.

note that it is a contribution for the North Carolina Education Endowment Fund.

To designate your overpayment, see instructions for Line 19 below.

(2) Returns for other individuals - A fiduciary, including the guardian of a

minor (who has not filed a return) and the guardian of a mentally incompetent

Line-by-Line Instructions

individual who has charge of the income of the individual, must file a return

on Form D-400 if a return is required for such an individual.

Line 1 - Enter on Line 1 the federal taxable income from Federal Form 1041, Line 22.

Line 2 - Additions to income - Determine the amount to enter on Line 2 by

year 2014 or fiscal year beginning in 2014. If the return is filed for other than a

completing Schedule A, Lines 1 through 3, and allocating the additions between

calendar year, fill in the beginning and ending dates of the taxable year in the

the beneficiaries and the fiduciary in Schedule B, Line 3. Enter on Line 2 the

boxes at the top of page 1.

amount from Line 3, Fiduciary Column of Schedule B.

(D) Time and place for filing - Returns must be filed with the North Carolina

Line 4 - Deductions from income - Determine the amount to enter on Line 4 by

Department of Revenue, P. O. Box 25000, Raleigh, North Carolina 27640-

completing Schedule A, Lines 4 through 10 and allocating the deductions between

0645, on or before the 15th of April for an estate or trust filing on the calendar

the beneficiaries and the fiduciary in Schedule B, Line 4. Enter on Page 1, Line

year basis, and on or before the 15th day of the fourth month following the close

4 the amount from Line 4, Fiduciary Column of Schedule B.

of the fiscal year for an estate or trust filing on a fiscal year basis.

Line 6 - If none of the federal taxable income, as adjusted (Line 5), is from dividends,

(E) Extensions - If Form D-407 cannot be filed by the due date, the fiduciary

interest, gains, losses, other intangibles, or is business income from sources outside

may apply for an automatic 6-month extension of time to file the return. To

North Carolina for the benefit of a nonresident beneficiary, the total income of the

receive the extension, the fiduciary must file Form D-410P, Application for

estate or trust is taxable to the fiduciary and you should enter zero on Line 6. If

Extension for Filing Partnership, Estate, or Trust Tax Return, by the original

there are nonresident beneficiaries and Line 5 includes any income from interest,

due date of the return.

dividends, gains, losses, other intangible property, or is business income from

sources outside North Carolina for the benefit of a nonresident beneficiary, enter

The fiduciary is not required to send a payment of the tax it estimates as due to

the amount of such income for the benefit of nonresident beneficiaries on Line 6.

receive the extension; however, it will benefit the estate or trust to pay as much

The determination of the amount of federal taxable income (as adjusted) which is

as it can with the extension request.

from intangible property or is business income from sources outside North Carolina

for the benefit of a nonresident beneficiary is based on the income beneficiary’s

A 10 percent late payment penalty will apply on the remaining balance due if the

state of residence on the last day of the taxable year of the estate or trust. In the

tax paid by the original due date of the return is less than 90 percent of the total

case of both resident and nonresident income beneficiaries, the determination of

tax due. If the 90 percent rule is met, any remaining balance due must be paid

the amount of federal taxable income (as adjusted) which is from intangible property

with the estate or trust return on or before the expiration of the extension period

or sources outside of North Carolina for the benefit of nonresidents is made on the

to avoid the late payment penalty. A fiduciary may file the return at any time within

basis that the nonresident beneficiaries’ income interests for the taxable year relate

the extension period but it must be filed on or before the end of the extension

to the income interests of both resident and nonresident income beneficiaries for

period to avoid the late filing penalty.

the taxable year.

(F) Signature - The fiduciary or authorized representative must sign Form

Line 9 - Complete Form D-407TC, Estates and Trusts Tax Credit Summary to

D-407. The return must also be signed by the person or in the name of the firm

determine the fiduciary’s share of any tax credits. Enter on Line 9 the amount

or corporation preparing the fiduciary’s return for compensation. The daytime

from Form D-407TC, Line 12.

telephone number of the fiduciary should be shown so that he may be reached if

additional information is needed to process the return. For tax due returns only,

Line 10 - If Form D-410P was filed to request an extension of time to file Form

the preparer’s facsimile signature is acceptable provided the preparer submits

D-407, include any tax paid with the extension on Line 10.

with the return a letter, manually signed by the preparer, identifying each return

bearing the facsimile signature by taxpayer name and identifying number and a

Line 11 - No estimated tax is required of a fiduciary; however, if the fiduciary

declaration under penalty of perjury that the facsimile signature on each return is

makes any prepayments of tax, include the prepayment on Line 11. If filing an

the signature used by the preparer to sign the return.

amended return, include on this line any amount paid with the original return.

(G) When and to whom the tax must be paid - The tax of an estate or trust must

Line 12 - If tax was paid by a partnership or S corporation on behalf of the estate

be paid in full when the return is filed.

The tax may be paid by check or money

or trust, enter the amount paid and include with the return a copy of the information

order payable in U.S. dollars to the North Carolina Department of Revenue.

furnished by the partnership or S corporation to verify the payment. Also enter

Important: The Department will not accept a check or money order unless it

any North Carolina tax withheld that was reported on Form 1099R and include

is drawn on a U.S. (domestic) bank and the funds are payable in U.S. dollars.

a copy of the form.

(H) Penalties and interest - For failure to file a timely estate or trust return, the

Line 15 - Enter the total penalties on Line 15a and interest due on Line 15b.

penalty is 5 percent of the tax per month with a 25 percent maximum. Returns

[See (H) Penalties and interest above.] Add Lines 15a and 15b and enter the

filed after April 15 without a valid extension are subject to a late payment penalty

total on Line 15c.

of 10 percent of the unpaid tax.

In addition, penalties are provided for fraud,

for willful failure to file on time, and for willful attempt to evade or defeat the tax.

Line 16 - Pay this Amount - Add lines 14 and 15c and enter the total. The total

Taxes also bear interest from the due date until the date paid.

tax, penalties, and interest due must be paid by the fiduciary responsible for

administering the estate or trust.

(I) Copy of governing instrument - A copy of the decedent’s will or the trust instrument

Line 18 - Contribution to the N. C. Nongame and Endangered Wildlife Fund

is not required unless the Department of Revenue requests it. If the Department

- Help keep North Carolina wild by contributing any portion of your refund to the

requests it, file a copy (including any amendments) with the following:

N. C. Nongame and Endangered Wildlife Fund. Your tax deductible contributions

(1) A signed statement under affirmation that the copy of the will is

are essential to monitoring and managing our wildlife populations, including turtles,

true and complete.

flying squirrels, frogs, mussels, salamanders, and hundreds of bird species from

(2) A statement listing the provisions of the will or the trust instrument

terns and pelicans to woodpeckers and warblers. Conserving these species

that divide the income among the estate or trust and the beneficiaries.

and their habitats is important to our state, our economy, and our quality of life.

(J) Specific Instructions for Form NC K-1 - Schedule NC K-1 for Form D-407

If wildlife conservation is important to you, please give what you can and help

is used by an estate or trust to report each beneficiary’s share of income,

conserve North Carolina’s wildlife for future generations to enjoy.

adjustments, tax credits, etc. Prepare and give a Schedule NC K-1 to each person

who was a beneficiary of the estate or trust at any time during the year. Schedule

If you wish to contribute to the Fund, enter the amount of your contribution on

Instructions For Estates And Trusts Income Tax Return (Form D-407a) - 2014 Page 2

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