My Annual Thank You To Our Beloved IRS

It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”

My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)

Today, between my SS, pension, IRA’s and the Trust, not to mention my wife’s SS, pension and IRA’s we will never touch the trust, yet we still pay in every year. I often tell my tax guy that he needs to figure out a way for me to at least lessen my tax burden. I don't mind paying my fair share, but it seems like I’m paying more than I should be.

Answer this, if you can. My mom set up the Trust as an irrevocable Trust, but I still pay taxes each year on the money the Trust earned even though I never touch any of the money. Is this correct? In fact, I have to file a separate form (1041, I believe) just to pay the tax. I often wonder why or how Mom got talked into setting the money up in an irrevocable Trust. Any ideas?
 

oldman said:
It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”

My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)

Today, between my SS, pension, IRA’s and the Trust, not to mention my wife’s SS, pension and IRA’s we will never touch the trust, yet we still pay in every year. I often tell my tax guy that he needs to figure out a way for me to at least lessen my tax burden. I don't mind paying my fair share, but it seems like I’m paying more than I should be.

Answer this, if you can. My mom set up the Trust as an irrevocable Trust, but I still pay taxes each year on the money the Trust earned even though I never touch any of the money. Is this correct? In fact, I have to file a separate form (1041, I believe) just to pay the tax. I often wonder why or how Mom got talked into setting the money up in an irrevocable Trust. Any ideas?
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So you're wallowing in wealth and complaining? Things are rough all over aren't they?
 
norman said:
The IRS empoyees over 80,000 people to collect taxes. The IRS is one of the most powerful units of our government and our tax laws cause tax payers to attempt to cheat. If they decide you have an error on your taxes and you still owe $1000.00 it is up to you to prove you don't owe. The solution to the IRS would to close that unit of the government. Then establish a National Sales Tax, when you purchase a item you pay the tax at that time and you are done. No filing taxes no more IRS.
The present tax code was established by politicians who spend our tax money like there is no limit and give raises to guess who. IT SEEMS THAT THE RUES ARE: Tax his land, tax his bed, tax the table where he is fed, tax his tractor, tax his mule, teach him that taxes are the rule, tax his work, tax his pay, he works for peanunts any way, tax his cow, tax his goat, tax his coat, tax his pants, tax his shirt, tax his dirt, tax his tobacco, tax his drink, tax him if he trys to think, tax his cigar, tax his beer, tax him if sheds any tears, find other ways to tax his ass, and when he is gone, do not relax, its time to add inheritance tax.

How did this happen spell............. POLITICIANS with the IRS to do the dirty work.
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I don't like the sales tax as much as a value added tax. There is one person running for President that is advocating for such and I have donated to their campaign. I know we can't discuss politics here so I won't mention that person's name.
 

Trade....Your post is pretty much why I have never asked for a solution to my issue. The money in my Trust is not really mine. I did not earn it and I will never use any of it, yet the Trust is taxed, even though none of the money is being withdrawn. All the money in the Trust will be passed onto others, who will then also be taxed, whether they use any of the money or not.

If this taxing on the money in the Trust is going to go on forever, I may as well just donate it now and be done with it. My tax man tells me that I could “act” as a philanthropist and donate a percentage each year, or at least whatever the Trust earns. I am more than willing to do this, unless there is a way that I could avoid paying tax on money that I do not use.

I have been wondering if I could pass it on now to my children or grandchildren to avoid paying any taxes or would they then be responsible for paying taxes on the Trust? And, would there be any tax implications by just passing on the money?

Lastly, Trade, I also want to add that between my wife and I, we do contribute a nice piece of change each year to several different charities and have no plans to cease doing so.
 
oldman said:
Trade....Your post is pretty much why I have never asked for a solution to my issue. The money in my Trust is not really mine. I did not earn it and I will never use any of it, yet the Trust is taxed, even though none of the money is being withdrawn. All the money in the Trust will be passed onto others, who will then also be taxed, whether they use any of the money or not.

If this taxing on the money in the Trust is going to go on forever, I may as well just donate it now and be done with it. My tax man tells me that I could “act” as a philanthropist and donate a percentage each year, or at least whatever the Trust earns. I am more than willing to do this, unless there is a way that I could avoid paying tax on money that I do not use.

I have been wondering if I could pass it on now to my children or grandchildren to avoid paying any taxes or would they then be responsible for paying taxes on the Trust? And, would there be any tax implications by just passing on the money?

Lastly, Trade, I also want to add that between my wife and I, we do contribute a nice piece of change each year to several different charities and have no plans to cease doing so.
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I have no idea what any of that means. But since nobody died and left me a boatload of money I guess I'll just be thankful I don't have to worry about it.
 
oldman said:
It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”

My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)

Today, between my SS, pension, IRA’s and the Trust, not to mention my wife’s SS, pension and IRA’s we will never touch the trust, yet we still pay in every year. I often tell my tax guy that he needs to figure out a way for me to at least lessen my tax burden. I don't mind paying my fair share, but it seems like I’m paying more than I should be.

Answer this, if you can. My mom set up the Trust as an irrevocable Trust, but I still pay taxes each year on the money the Trust earned even though I never touch any of the money. Is this correct? In fact, I have to file a separate form (1041, I believe) just to pay the tax. I often wonder why or how Mom got talked into setting the money up in an irrevocable Trust. Any ideas?
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Why shouldn’t you pay taxes on the money earned in the trust ? It is earned income whether you take it , can access it or not .. in the eyes of the law a trust is like a living ,breathing person who owns the assets , we can call him uncle charlie . .. the trust even has to file its own taxes just like a real person.

just like any money uncle Charlie earns is taxable whether he spends it or not so do trusts ..... heck if you don’t want the trust to pay taxes on gains and income lose money or just send it to me ... I will gladly pay the tax..

the problem is you just have no idea what a trust is or represents ..it is not a tax problem ,it is your own lack of knowledge problem
 
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mathjak107 said:
you are lucky then ...i have never known my ss not to be taxed ... so it is not a thought . it has hit the taxable level for us day 1.
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I think you misread my post. I always pay SS tax but this year because I made more than 2017 I paid more tax out of my SS.
 
If it ain't broke, don't fix it. Cheers!
oldman said:
It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”

My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)

Today, between my SS, pension, IRA’s and the Trust, not to mention my wife’s SS, pension and IRA’s we will never touch the trust, yet we still pay in every year. I often tell my tax guy that he needs to figure out a way for me to at least lessen my tax burden. I don't mind paying my fair share, but it seems like I’m paying more than I should be.

Answer this, if you can. My mom set up the Trust as an irrevocable Trust, but I still pay taxes each year on the money the Trust earned even though I never touch any of the money. Is this correct? In fact, I have to file a separate form (1041, I believe) just to pay the tax. I often wonder why or how Mom got talked into setting the money up in an irrevocable Trust. Any ideas?
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fmdog44 said:
I think you misread my post. I always pay SS tax but this year because I made more than 2017 I paid more tax out of my SS.
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you always have two moving targets when you collect ss .. the more other income you make the more the pile gets taxed .. but the good news is once you hit the 85% of ss taxed any other income increases don't effect it .

the worst is when you are at the cross over points .. you can take a mere 1k extra out of an ira and see a 47% marginal tax on the extra 1k because of the two moving targets ...the less income you have the more aware of this stuff you need to be .

Harry is an individual with $36,000 of income but a hefty $22,000/year of Social Security benefits. His Social Security provisional income is $36,000 + $11,000 = $47,000, which is $13,000 over the upper threshold for individuals. As a result, $15,550 of his Social Security benefits are subject to taxation (which is 50% of the amount from $25,000 to $34,000, plus 85% of the excess of provisional income above the $34,000 threshold), which puts his AGI at $51,550. Even after a standard deduction and one personal exemption, Harry's taxable income would be $51,550 - $6,100 - $3,900 = $41,550, which places him in the 25% tax bracket.

If Harry now takes an additional $1,000 from his IRA, his provisional income increases to $48,000, his taxable Social Security benefits increase to $16,400, and his AGI rises to $53,400. The net result: Harry's AGI increased by $1,850 for "just" a $1,000 IRA withdrawal, and with a 25% tax bracket his liability will be $1,850 x 25% = $462.50, which equates to a whopping $462.50 / $1,000 = 46.25% marginal tax rate!
 
mathjak107 said:
Why shouldn’t you pay taxes on the money earned in the trust ? It is earned income whether you take it , can access it or not .. in the eyes of the law a trust is like a living ,breathing person who owns the assets , we can call him uncle charlie . .. the trust even has to file its own taxes just like a real person.

just like any money uncle Charlie earns is taxable whether he spends it or not so do trusts ..... heck if you don’t want the trust to pay taxes on gains and income lose money or just send it to me ... I will gladly pay the tax..

the problem is you just have no idea what a trust is or represents ..it is not a tax problem ,it is your own lack of knowledge problem
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Of course it’s my lack of knowledge. That’s why I am asking questions. Here’s other situations similar, although not the same, that may help you understand why I am confused. When I retired, I had to move my 401(k). I had a choice of either cashing out or moving it to a retirement IRA. I did the latter, which the IRS called a “Trust To Trust” transfer and there was no tax liability. Another one, my wife and I bought savings bonds as a hedge against any stock or other investment losses. We bought bonds for almost 40 years, so we have quite a few in the safe. At that time, we had a choice to either estimate the gain and pay the tax on those bonds yearly, or wait until we cash them in and then pay the tax. If we never cash them in and pass them onto our heirs, then they would assume the tax liability.

Continuing on, my best friend had his 401(k) set up to only invest after tax money. When he retired, he withdrew his portion of the money, (only the part that he invested with after tax money) and opened a Roth IRA. The other money that was the money the after tax money had earned was moved to a retirement IRA and he had no tax liability.

So, taking these situations into account, I have to believe that because I inherited money that I never earned and have never used one cent of, that there should be something in the tax laws for me to avoid not paying any taxes on that money until I either take it out or pass it on. I went to the local IRS office and the agent told me that there “may” be a way to do this and he was going to send me a booklet from the IRS that would explain my options, but no booklet ever came. I have also asked several other tax accountants that some have said there is no way around this, but a few others have said that it could be done, but there would be some steps involved to get the money moved from the Trust to either a gift or another form of inheritance. I think this is may be what the IRS agent was referring to.

I think my next move will be to go back to the IRS and sit down with them, especially since the tax laws have again changed.
 
a trust is a "person " .... it is treated as a living breathing individual , other then you .. it is if you gave the assets way to some other person ... that is why and how it is taxed . it is not your money any more. it is in no way like an ira , a roth or anything else you own . all you are is someone this other person is giving some of their money to yearly if they want some .. so the trust has nothing to do with your taxes and the money used to pay those taxes should be coming from the trust so you really have nothing to complain about or have your accountant fix since it is not about you. the trust pays it's own taxes
 
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Last question and then I'll leave this dog alone. What I see happening is that I file a Form 1041 (I think that's the number.) and the only tax that I have been paying is on what the trust earns and not on the amount initially received. My confusion was that in the IRS code, it reads that trusts are taxed on the amount of the "disbursement." I took that to mean the amount that I physically received, but in reality what that means is what the trust receives and because I am the beneficiary of the trust, I pay tax on that disbursement. My sister did not have this issue because she cashed out almost as soon as she received it.

I never really spent a lot of time thinking about this because as long as the initial amount wasn't being touched, I trusted my tax guy was doing the right thing and because I never heard anything from the IRS, I was OK with it. I guess that I should have been more" into it," but just preferred to believe that everything was being done properly, although I did have questions.

Now, I can close the book on this matter. Thanks for your help.
 

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