Section references are to the Internal Revenue Code unless otherwise noted.
For the latest information about developments related to Form 1041-N and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form1041N.
Use this revision for tax years beginning after 2017.
Under section 646, an Alaska Native Settlement Trust (ANST) may elect to apply special income tax treatment to the trust and its beneficiaries. This one-time election is made by filing Form 1041-N in the first tax year of the trust. Form 1041-N is used to report an ANST's income, deductions, gains, losses, etc., and to figure and pay any income tax due. Form 1041-N is also used to report special information applicable to an ANST's filing requirements.
An ANST is a settlement trust within the meaning of section 3(t) of the Alaska Native Claims Settlement Act (ANCSA).
An Alaska Native Corporation (ANC) has the same meaning as the term "Native Corporation" has under section 3(m) of the ANCSA.
A sponsoring ANC means the ANC that transfers assets to an electing ANST.
A trustee is a fiduciary of the trust. Any reference in these instructions to “you” means the trustee of the trust.
Figure the AGI of an electing ANST by subtracting from total income (line 5) administrative costs (lines 7 through 9) and the exemption amount (line 11). Administrative costs are deductible to the extent they would not have been incurred if the property were not held by the ANST.
In general, an electing ANST's taxable income is figured in the same manner as any other taxable trust (see Internal Revenue Code subchapter J). However, the electing ANST isn't allowed to take an income distribution deduction, though it can claim an exemption deduction, the amount of which depends on the terms of the trust.
See the Schedule K instructions for information on the beneficiaries' tax treatment of distributions received from the ANST.
The ANST reports income assignments from an ANC on the appropriate income line consistent with the type of income assigned to the ANST. See Part III—Other Information, Question 1 , later, for the information required to be attached to the form.
An electing ANST pays tax on its taxable income at the lowest rate specified for single individuals (10%). If the ANST has net capital gain or qualified dividends, use the tax computation on Part IV of Schedule D, which applies a 0% rate on its adjusted net capital gain.
If, at any time, a beneficial interest in an ANST may be disposed of to a person in a manner that isn't permitted by section 7(h) of the ANCSA (if the interest were settlement common stock), then:
If stock in the sponsoring ANC may be disposed of to a person in a manner that isn't allowed by section 7(h) of the ANCSA (if the stock were settlement common stock) and at any time after such disposition of stock is first allowed, the corporation transfers assets to an ANST, then items 1, 2, and 3 above will apply to the ANST in the same manner as if the ANST allowed dispositions of beneficial interests in the ANST in a manner not allowed by section 7(h) of the ANCSA.
The surrender of an interest in an ANC or an electing ANST by the shareholder or beneficiary, for a whole or partial redemption or for the whole or partial liquidation of the corporation or trust, will be considered a transfer allowed by section 7(h) of the ANCSA.
Electing ANSTs must complete Schedule K and file it with Form 1041-N. The ANST must also provide a copy of Schedule K to the sponsoring ANC by the date Form 1041-N is required to be filed with the IRS. The ANST isn't required to provide information to the beneficiaries on distributions made to them. The sponsoring ANC will provide the beneficiaries with any required information.
The trustee of any electing ANST having any taxable income, or having gross income of at least $600 for the tax year, must file Form 1041-N for that year.
The trustee of an ANST must make this election by the due date (including extensions) for filing the ANST's tax return for its first tax year.
The trustee makes the election for the ANST by signing Form 1041-N in the signature block on page 1. The return must be filed by the due date (including extensions) for filing the ANST's tax return for its first tax year. Once the election is made, it applies to all subsequent years and can't be revoked.
ANSTs file Form 1041-N by the 15th day of the 4th month following the close of the tax year. If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day.
You can use certain private delivery services (PDSs) designated by the IRS to meet the "timely mailing as timely filing" rule for tax returns. Go to IRS.gov/PDS for the current list of designated services.
The PDS can tell you how to get written proof of the mailing date.
For the IRS mailing address to use if you’re using a PDS, go to IRS.gov/PDSStreetAddresses.
PDSs can't deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.
Use Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to request an automatic extension of time to file.
An extension of time to file doesn't extend the time to pay the tax.
File Form 1041-N at the following address.
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0027
The trustee or an authorized representative must sign Form 1041-N.
Generally, anyone who is paid to prepare a tax return must sign the return and provide the information requested in the Paid Preparer Use Only area of the return. The person required to sign the return must:
If the trustee wants to allow the IRS to discuss the ANST's tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the Paid Preparer Use Only section of the ANST's return. It doesn't apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the trustee is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of the ANST's return. The trustee is also authorizing the paid preparer to:
The trustee isn't authorizing the paid preparer to receive any refund, enter into any agreement (including those regarding additional tax liability), or otherwise represent the ANST before the IRS. If the trustee wants to expand the paid preparer's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.
The authorization can't be revoked. However, the authorization will automatically end no later than the due date (regardless of extensions) for filing the ANST's next tax return.
Figure taxable income using the method of accounting regularly used in keeping the ANST's books and records. Generally, permissible methods include the cash method, the accrual method, or any other method authorized by the Internal Revenue Code. In all cases, the method used must clearly reflect income.
Generally, the ANST may change its accounting method (overall method or for any material item) only by getting consent on Form 3115, Application for Change in Accounting Method. For more information, see Pub. 538, Accounting Periods and Methods.
All electing ANSTs must adopt a calendar year.
You may round off cents to whole dollars on the ANST's return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50
becomes $3.
If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.
Generally, an ANST must pay estimated income tax if it expects to owe at least $1,000 after subtracting withholding and credits. For details and exceptions, see Form 1041-ES, Estimated Income Tax for Estates and Trusts.
Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is also charged on the failure-to-file penalty, the accuracy-related penalty, and the fraud penalty. The interest charge is figured at a rate determined under section 6621.
The law provides a penalty of 5% of the tax due for each month, or part of a month, that the return isn’t filed up to a maximum of 25% of the tax due. If the return is more than 60 days late, the minimum penalty is the smaller of $435 or the tax due. The penalty won’t be imposed if you can show that the failure to file on time is due to reasonable cause. If you receive a notice about penalty and interest after you file this return, send us an explanation, and we will determine if you meet reasonable-cause criteria. Don’t attach an explanation when you file Form 1041-N.
For more information about penalties for late filing, see Late Filing of Return in the Instructions for Form 1041.
Section 6651 also provides for penalties for late payment. Generally, the penalty for not paying the tax when due is ½ of 1% of the unpaid amount for each month or part of a month it remains unpaid. The maximum penalty is 25% of the unpaid amount. The penalty is imposed on the net amount due. Any penalty is in addition to interest charges on late payments.
If you include interest or either of these penalties with your payment, identify and enter these amounts in the bottom margin of Form 1041-N. Don’t include the interest or penalty amount in the balance of tax due on line 18.
If the trustee underpaid estimated tax, use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to figure any penalty due. Enter the amount of the penalty in the bottom margin of Form 1041-N. Don’t include it in the balance of tax due on line 18.
Other penalties can be imposed for negligence, substantial understatement of tax, and fraud. See Pub. 17, Your Federal Income Tax, for details on these penalties.
Enter the year (or period) for which you are filing for the electing ANST.
Enter the exact name that was used to apply for the employer identification number (EIN) for the trust to file Form 1041-N.
Enter the name and title (if any) of the trustee. If a fiduciary relationship was created or terminated, file Form 56, Notice Concerning Fiduciary Relationship.
If a fiduciary relationship wasn't created or terminated but the fiduciary had a change in name or another fiduciary's name was entered, check the “Change in fiduciary's name” box on line 6.
Include the suite, room, or other unit number after the street address. If the Post Office doesn't deliver mail to the street address and you have a P.O. box, show the box number instead of the street address.
If you change your address after filing Form 1041-N, use Form 8822-B, Change of Address or Responsible Party—Business, to notify the IRS.
If a different address from the prior year was entered and Form 8822-B wasn't filed, check the box on line 6 for “Change in fiduciary's address.”
Be sure to check all the boxes that apply. Also, see the line 3a and line 3b instructions above for information regarding a change in the fiduciary's name and for information on changes to the fiduciary's address.
Report the total of all ordinary dividends received during the tax year.
Enter the ANST's total qualified dividends on line 2b and use Part IV of Schedule D to figure the ANST's tax. Qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, these dividends are shown in box 1b of Form(s) 1099-DIV, Dividends and Distributions. See Pub. 550, Investment Income and Expenses, for the definition of qualified dividends if you received dividends not reported on Form 1099-DIV.
Exceptions.
Some dividends may be reported as qualified dividends in box 1b of Form 1099-DIV but aren't qualified dividends. These include the following.
Enter the gain from Schedule D, line 11, or the loss from Schedule D,
line 12.
Report capital gain distributions on Schedule D (Form 1041-N), line 7.
List the type and amount of income not included on lines 1a through 3. List the types and amounts on an attached schedule if the ANST has more than one item of other income.
Include on line 4 taxable contributions received from an ANC. See also Part III—Other Information, Question 1 , later, for additional information that may need to be attached to the return. Include on this line income recognized on the early disposition of noncash property for which the ANST previously made a section 247(g) election. See also Part III—Other Information, Question 1 , later, for additional information that may need to be attached to the return. Include on this line the ordinary income recognized on the disposition of property for which the ANST made a section 247(g) election. Report on Schedule D (Form 1041-N) the capital gain recognized on such disposition. See Section 247(g) Election Property in the Instructions for Schedule D (Form 1041-N) for additional information.
If the ANST is reporting global intangible low-taxed income (GILTI), include it on the attached statement. Complete and attach Form 8992.
Generally, no deduction is allowed for any expense that is allocable to tax-exempt income, such as interest on state or local bonds.
Exceptions.
State income taxes and business expenses that are allocable to tax-exempt interest are deductible.
Expenses that are directly allocable to tax-exempt income are allocable only to tax-exempt income. A reasonable proportion of expenses indirectly allocable to both tax-exempt income and other income must be allocated to each class of income.
Generally, the amount an ANST has "at-risk" limits the loss it can deduct in any tax year. Also, section 469 and its regulations generally limit losses from passive activities to the amount of income derived from all passive activities. Similarly, credits from passive activities are generally limited to the tax attributable to such activities.
For details on these and other limitations on deductions, see Deductions in the Instructions for Form 1041.
Miscellaneous itemized deductions subject to the 2% floor will not be allowed for tax years 2018 through 2025.
Attach a schedule listing by type and amount all allowable deductions that aren't deductible elsewhere on the form. No deduction is allowed for distributions to beneficiaries.
An ANST may elect under section 965(n) to determine the amount of the net operating loss (NOL) for a tax year determined under section 172 and the amount of taxable income to be reduced by NOL carryovers or carrybacks to such tax year without regard to certain amounts under section 172. The amount not taken into consideration (the reduction amount) is generally equal to the amount of the section 965(a) inclusion (net of the section 965(c) deduction). If, as a result of an election under section 965(n), the amount of the NOL for the tax year is adjusted, the reduction amount is included in other income on line 4. If, as a result of an election under section 965(n), the taxable income reduced by NOL carryovers or carrybacks is reduced, the NOL deduction on line 4 is reduced by the reduction amount. See section 965(n) and the regulations thereunder for more information.
In determining whether an expense is deductible it must be determined whether the expense would be "commonly or customarily" incurred by a hypothetical individual owning the same property. A cost incurred by an ANST is an allowable deduction to the extent that it is excluded from the definition of miscellaneous itemized deductions under section 67(b) and commonly or customarily would not be incurred by a hypothetical individual holding the same property.
Include on line 9 the deduction for qualified business income. For information on how to figure the trust's deduction for qualified business income, see Form 8995, Qualified Business Income Deduction Simplified Computation, and Form 8995-A, Qualified Business Income Deduction.
Don’t enter any information on line 10.