Agency Information Collection Activities; Submission for OMB Review; Collection;

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Published

December 19, 2024

Issuing agencies

Treasury Department

Abstract

The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995 (PRA). The IRS is soliciting comments on Trust and Estate Income Tax Returns and Related Forms.

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<title>Federal Register, Volume 89 Issue 244 (Thursday, December 19, 2024)</title>
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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103926-103930]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30066]

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DEPARTMENT OF THE TREASURY

Agency Information Collection Activities; Submission for OMB
Review; Collection;

Comment Request for Trust and Estate Income Tax Returns and Related
Forms
AGENCY: Departmental Offices, U.S. Department of the Treasury.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Internal Revenue Service, as part of its continuing effort
to reduce paperwork and respondent burden, invites the general public
and other

[[Page 103927]]

Federal agencies to take this opportunity to comment on proposed and/or
continuing information collections, as required by the Paperwork
Reduction Act of 1995 (PRA). The IRS is soliciting comments on Trust
and Estate Income Tax Returns and Related Forms.

DATES: Comments should be received on or before January 21, 2025 to be
assured of consideration.

ADDRESSES: Written comments and recommendations for the proposed
information collection should be sent within 30 days of publication of
this notice to <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a>. Find this particular
information collection by selecting ``Currently under 30-day Review--
Open for Public Comments'' or by using the search function.

FOR FURTHER INFORMATION CONTACT: Copies of the submissions may be
obtained from Melody Braswell by emailing <a href="/cdn-cgi/l/email-protection#3666647776424453574543444f18515940"><span class="__cf_email__" data-cfemail="cb9b998a8bbfb9aeaab8beb9b2e5aca4bd">[email&#160;protected]</span></a>, calling
(202) 622-1035, or viewing the entire information collection request at
<a href="http://www.reginfo.gov">www.reginfo.gov</a>.

SUPPLEMENTARY INFORMATION:

Internal Revenue Service (IRS)

Title: Trust and Estate Income Tax Returns and related Forms.
OMB Number: 1545-0092.
Form Numbers: 1041, 1041 A, 1041 ES, 1041 ES (OCR), 1041 N, 1041
QFT, 1041 SCH D, 1041 SCH I, 1041 SCH J, 1041 SCH K-1, 1041 T, 1041 V,
172, 461, 926, 965 A, 982, 1040 SCH C, 1040 SCH E, 1040 SCH F, 1040 SCH
H, 1045, 1065 SCH D, 1065 SCH K-2, 1116, 1116 SCH B, 1116 SCH C, 2210,
2210 F, 2439, 3115, 3468, 3800, 4136, 4255, 4562, 4684, 4797, 4952,
4970, 4972, 5227, 5329, 5471, 5471 SCH E, 5471 SCH G1, 5471 SCH H, 5471
SCH I1, 5471 SCH J, 5471 SCH M, 5471 SCH O, 5471 SCH P, 5471 SCH Q,
5471 SCH R, 5713, 5713 SCH B, 5713 SCH C, 5884, 5884 A, 6198, 6252,
6478, 6765, 6781, 7205, 7207, 7210, 7211, 7213, 7217, 7218, 8082, 8275,
8275 R, 8453 FE, 8582, 8582 CR, 8586, 8594, 8609 A, 8611, 8621, 8697,
8801, 8820, 8824, 8825, 8826, 8829, 8830, 8833, 8835, 8844, 8845, 8846,
8855, 8858, 8858 SCH M, 8864, 8865, 8865 SCH G, 8865 SCH H, 8865 SCH K-
1, 8865 SCH K-2, 8865 SCH K-3, 8865 SCH O, 8865 SCH P, 8866, 8873, 8879
F, 8881, 8882, 8886, 8896, 8903, 8904, 8908, 8910, 8911, 8911 SCH A,
8912, 8918, 8932, 8933, 8933 SCH A, 8933 SCH B, 8933 SCH C, 8933 SCH D,
8933 SCH E, 8933 SCH F, 8936, 8938, 8941, 8949, 8960, 8978, 8978 SCH A,
8990, 8992, 8992 SCH A, 8994, 8995, 8995 A, 8995 A SCH A, 8995 A SCH B,
8995 A SCH C, 8995 A SCH D, 8997, 8582-CR, 8609-A, T, and associated.
Abstract: These forms are used by trusts and estates to comply with
their income tax reporting requirement. The data is used to verify that
the items reported on the forms are correct.
Current Actions: The burden estimation methodology for trust and
estate tax is being transitioned from the legacy Arthur D. Little (ADL)
methodology to the IRS Taxpayer Burden Model. The changes discussed
above result in a burden hour estimate of 31,900,000 hours, a decrease
in total estimated time burden of 364,570,339 hours. The newly reported
total out-of-pocket costs is $5,501,000,000 and total monetized burden
is $7,573,000,000. The change related to the transition of the burden
estimate from the legacy ADL model methodology to the IRS Taxpayer
Burden Model, is a one-time change. In addition, changes are being made
to the forms to be current with enacted legislation.
Type of Review: Revision of currently approved collection.
Affected Public: Trusts and Estates.
Estimated Number of Respondents: 3,070,000.
Estimated Time per Respondent (Hours): 10 minutes, 40 minutes.
Estimated Total Annual Time (Hours): 31,900,000 hours.
Estimated Total Annual Monetized Time ($): 2,072,000,000.
Estimated Annual Monetized Time per Respondent ($): 693.
Estimated Total Out-of-Pocket Costs ($): 5,501,000,000.
Estimated Out-of-Pocket Cost per Respondent ($): 1,838.
Estimated Total Monetized Burden ($): 7,573,000,000.
Estimated Monetized Burden per Respondent ($): 2,531.

Note: Total Monetized Burden = Total Out-of-Pocket Costs +
Total Annual Monetized Time.

Change in PRA Approval of Forms Used by Trusts and Estates

Under the PRA, OMB assigns a control number to each ``collection of
information'' that it reviews and approves for use by an agency. A
single information collection may consist of one or more forms,
recordkeeping requirements, and/or third-party disclosure requirements.
Under the PRA and OMB regulations, agencies have the discretion to seek
separate OMB approvals for forms, recordkeeping requirements, and
third-party reporting requirements or to combine any number of forms,
recordkeeping requirements, and/or third-party disclosure requirements
(usually related in subject matter) under one OMB Control Number.
Agency decisions on whether to group individual requirements under a
single OMB Control Number or to disaggregate them and request separate
OMB Control Numbers are based largely on considerations of
administrative practicality.
The PRA also requires agencies to estimate the burden for each
collection of information. Accordingly, each OMB Control Number has an
associated burden estimate. The burden estimates for each control
number are displayed in (1) the PRA notices that accompany collections
of information, (2) Federal Register notices such as this one, and (3)
in OMB's database of approved information collections. If more than one
form, recordkeeping requirement, and/or third-party disclosure
requirement is approved under a single control number, then the burden
estimate for that control number reflects the burden associated with
all of the approved forms, recordkeeping requirements, and/or third-
party disclosure requirements.
As described below under the heading ``Updated Burden Estimate
Methodology,'' the IRS's currently accepted burden estimate
methodology, referred to as the IRS Taxpayer Burden Model, is based on
taxpayers' tax reporting experience taking into account, among other
things, the forms and schedules used by those taxpayers and the
recordkeeping and other activities needed to complete those forms. The
transition of the trust and estate income tax reporting burden
represents the IRS's continued effort to improve the ability of IRS to
measure the burden imposed on various groups of taxpayers by the
federal tax system. While the improved methodology provides a more
accurate and comprehensive description of the trust and estate income
tax reporting burden, it will not provide burden estimates on a form-
by-form basis, as has been done under the previous methodology. When
the prior model, known as the legacy Arthur D. Little (ADL) model was
developed in the mid-1980s, almost all tax returns were prepared
manually, either by the taxpayer or a paid provider. In this context,
it was determined that estimating burden on a form-by-form, line-by-
line basis was an appropriate methodology. Trust and estate income tax
returns are increasingly being prepared using software or with preparer
assistance. In this current reporting environment, in which many
taxpayers' activities are no longer as directly associated with
particular forms, estimating burden on a

[[Page 103928]]

form-by-form basis is not an appropriate method of estimating taxpayer
burden. The IRS Taxpayer Burden Model, which takes into account broader
and more comprehensive taxpayer characteristics and activities,
provides a much more accurate and useful estimate of taxpayer burden.
Currently, there are 153 forms and 27 regulations used by trust and
estates pertaining to their income tax reporting requirements. These
include Forms 1041, 1041 A, 1041 ES, 1041 ES (OCR), 1041 N, 1041 QFT,
1041 SCH D, 1041 SCH I, 1041 SCH J, 1041 SCH K-1, 1041 T, 1041 V, 172,
461, 926, 965 A, 982, 1040 SCH C, 1040 SCH E, 1040 SCH F, 1040 SCH H,
1045, 1065 SCH D, 1065 SCH K-2, 1116, 1116 SCH B, 1116 SCH C, 2210,
2210 F, 2439, 3115, 3468, 3800, 4136, 4255, 4562, 4684, 4797, 4952,
4970, 4972, 5227, 5329, 5471, 5471 SCH E, 5471 SCH G1, 5471 SCH H, 5471
SCH I1, 5471 SCH J, 5471 SCH M, 5471 SCH O, 5471 SCH P, 5471 SCH Q,
5471 SCH R, 5713, 5713 SCH B, 5713 SCH C, 5884, 5884 A, 6198, 6252,
6478, 6765, 6781, 7205, 7207, 7210, 7211, 7213, 7217, 7218, 8082, 8275,
8275 R, 8453 FE, 8582, 8582 CR, 8586, 8594, 8609 A, 8611, 8621, 8697,
8801, 8820, 8824, 8825, 8826, 8829, 8830, 8833, 8835, 8844, 8845, 8846,
8855, 8858, 8858 SCH M, 8864, 8865, 8865 SCH G, 8865 SCH H, 8865 SCH K-
1, 8865 SCH K-2, 8865 SCH K-3, 8865 SCH O, 8865 SCH P, 8866, 8873, 8879
F, 8881, 8882, 8886, 8896, 8903, 8904, 8908, 8910, 8911, 8911 SCH A,
8912, 8918, 8932, 8933, 8933 SCH A, 8933 SCH B, 8933 SCH C, 8933 SCH D,
8933 SCH E, 8933 SCH F, 8936, 8938, 8941, 8949, 8960, 8978, 8978 SCH A,
8990, 8992, 8992 SCH A, 8994, 8995, 8995 A, 8995 A SCH A, 8995 A SCH B,
8995 A SCH C, 8995 A SCH D, 8997, 8582-CR, 8609-A, T, and their
schedules. For most of these forms, IRS has in the past obtained
separate OMB approvals under unique OMB Control Numbers and separate
burden estimates.
The IRS Taxpayer Burden Model methodology estimates the aggregate
burden imposed on trusts and estates, based upon their reporting-
related characteristics and activities. IRS therefore will seek OMB
approval of all 153 trust and estate income tax forms as a single
``collection of information.'' The aggregate burden of these tax forms
will be accounted for under OMB Control Number 1545-0092, which is
currently assigned to Form 1041. OMB Control Number 1545-0092 will be
displayed on all trust and estate income tax forms and related
information collections. As a result of this change, burden estimates
for trust and estate income taxes will now be displayed differently in
PRA Notices on tax forms and other information collections, and in
Federal Register notices. This new way of displaying burden is
presented below under the heading ``Proposed PRA Submission to OMB.''

Updated Burden Estimate Methodology

The IRS Taxpayer Burden Model methodology revises the estimates of
the levels of burden experienced by trusts and estates when complying
with their federal reporting requirements pertaining to income taxes.
It replaces the legacy ADL model methodology developed in the mid-
1980s. Since that time, improved technology and modeling sophistication
have enabled the IRS to improve the burden estimates. The IRS Taxpayer
Burden Model methodology provides taxpayers and the IRS with a more
comprehensive understanding of the current levels of taxpayer burden.
It reflects major changes over the past two decades in the way
taxpayers prepare and file their returns. The IRS Taxpayer Burden Model
methodology also represents a substantial step forward in the IRS's
ability to assess likely impacts of administrative and legislative
changes on trusts and estates.
The IRS Taxpayer Burden Model methodology focuses on the
characteristics and activities of trusts and estates rather than solely
focusing on the forms they file. Key determinants of taxpayer burden in
the model are the type of trust or estate, the number of beneficiaries,
level of the trust or estate's income, and the complexity of the trust
or estate's income generated from assets and investments. Indicators of
tax law and administrative complexity, as reflected in the tax forms
and instructions, are incorporated into the model. Tax compliance
burden does not include a taxpayer's tax liability, economic
inefficiencies caused by sub-optimal choices related to tax deductions
or credits, or psychological costs. The legacy ADL model methodology
primarily focused on the number of line items of each tax form. The
changes between the old and new burden estimates are due to the
improved ability of the IRS Taxpayer Burden Model methodology to
measure burden and the expanded scope of what is measured. These
changes create a one-time shift in the estimate of imposed burden. It
is important to note that the difference between the legacy ADL
estimate and the IRS Taxpayer Burden Model estimate do not reflect any
change in the actual burden imposed by taxpayers.

Methodology

Burden is defined as the time and out-of-pocket costs incurred by
taxpayers to comply with their federal tax reporting responsibilities.
As has been done for individual taxpayer burden since 2005, business
entity burden since 2014, tax-exempt organization burden since 2018,
and employer taxpayer burden since 2023, both the time expended and the
out-of-pocket costs for trusts and estates are estimated. The IRS
Taxpayer Burden Model methodology relies on surveys that gather data
about time and out-of-pocket costs that trusts and estates spend on
pre-filing and filing activities. The methodology establishes
econometric relationships between tax return characteristics and
reported compliance costs. The methodology controls for the
substitution of time and money by monetizing time and reporting total
compliance costs in dollars. This methodology better reflects taxpayer
compliance burden, because in a world of electronic tax preparation,
time and out-of-pocket costs are governed by the information required
rather than the form on which it is ultimately reported. Importantly,
even where various trusts and estates complete the same tax form lines,
the new methodology differentiates the cost incurred to complete those
forms based on characteristics of those trusts and estates. Key
characteristics that serve as coefficients in the trust and estates
reporting burden model are:

<bullet> Type of trust or estate
<bullet> Level of income
<bullet> Complexity of income and deductions
<bullet> Number of beneficiaries

The IRS Taxpayer Burden Model methodology is based on survey data
collected using the following stratification for trusts and estates:

Form 1041 Strata
------------------------------------------------------------------------
Fiduciary code Income level
------------------------------------------------------------------------
1 = Estate............................. <$5.
$5-$999.
$1,000-$4,999.
$5,000-$24,999.
$25,000-$74,999.
$75,000-$149,999.
>=$150,000.
------------------------------------------------------------------------
2 = Simple Trust....................... <$5.
$5-$999.
$1,000-$4,999.
$5,000-$24,999.
$25,000-$74,999.
$75,000-$149,999.
>=$150,000.
------------------------------------------------------------------------
3 = Complex Trust...................... <$5.
$5-$999.
$1,000-$4,999.
$5,000-$24,999.
$25,000-$74,999.
$75,000-$149,999.

[[Page 103929]]

>=$150,000.
------------------------------------------------------------------------
4 = Nontaxable Grantor Trust........... Any.
------------------------------------------------------------------------
5 = Bankruptcy Trust Ch. 7............. Any.
------------------------------------------------------------------------
6 = Bankruptcy Trust Ch. 11............ Any.
------------------------------------------------------------------------
8 = Qualified Dividend Trust........... <$5.
>=$5.
------------------------------------------------------------------------
9 = Pooled Investment Funds............ <$5.
>=$5.
------------------------------------------------------------------------
Source: IRS:RAAS:KDA (08-23-2024).

Fiscal Year (FY) 2025 Burden Total Estimates for Trust and Estate Income Tax Forms, Schedules, and Regulations
--------------------------------------------------------------------------------------------------------------------------------------------------------
Program change
FY23 to 24 Program change due due to new Program change FY25
to adjustment legislation due to agency
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Respondents......................................... * 19,120,534 (16,050,534) 0 0 ** 3,070,000
Burden in Hours............................................... 396,470,339 (364,570,339) 0 0 31,900,000
Monetized time Burden......................................... $0 $2,072,000,000 $0 $0 $2,072,000,000
Out-of-Pocket Costs........................................... $0 $5,501,000,000 $0 $0 $5,501,000,000
-----------------------------------------------------------------------------------------
Total Monetized Burden ***................................ $0 $7,573,000,000 $0 $0 $7,573,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: IRS:RAAS:KDA (11-18-2024).
* FY23 responses per year is a count of all forms and schedules filed under legacy ADL Model methodology.
** FY25 responses per year is a count of all taxpayers under the IRS Taxpayer Burden Model methodology. This approach is also used for OMB 1545-0074
(individuals), 1545-0123 (business entities), 1545-0029 (employment tax), and 1545-0047 (tax-exempt organizations).
*** Total monetized burden = Total Out-of-Pocket Costs + Total Annual Monetized Time.
Note: Reported time and cost burdens are national averages and do not necessarily reflect a ``typical case.'' Most taxpayers experience lower than
average burden, with taxpayer burden varying considerably by taxpayer type. Detail may not add due to rounding.

The following additional breakouts of average burden are provided
for transparency in understanding the average estimated burden
experienced by taxpayers. Table 1 shows the average burden by filers of
Form 1041. Table 2 shows the average burden by total income. Table 3
shows the average burden by the number of K-1s attached to the Form
1041.

Table 1--FY2025 Average Burden Projections by Entity Type
----------------------------------------------------------------------------------------------------------------
Average
Entity type Percent of filed Average time Average out-of- monetized
Form 1041 ** (hrs.) pocket costs burden
----------------------------------------------------------------------------------------------------------------
Simple Trust................................ 17 9 $1,300 $1,900
Complex Trust *............................. 54 11 1,900 2,700
Decedent Estate............................. 12 18 3,300 4,400
Grantor Trust............................... 16 8 1,100 1,400
Qualified Disability Trust.................. 1 8 800 1,200
Pooled Income Fund.......................... <1 10 2,700 3,200
----------------------------------------------------------------------------------------------------------------
Source: IRS:RAAS:KDA (11-18-2024).
* The category of Complex Trusts includes Chapter 7 and Chapter 11 Bankruptcy Estates.
** Percentages based on Tax Year 2022 filings. Detail may not add to total due to rounding.

Table 2--FY2025 Average Burden Projections by Total Income *
----------------------------------------------------------------------------------------------------------------
Average
Total income Average time Average out-of- monetized
(hrs.) pocket costs burden
----------------------------------------------------------------------------------------------------------------
Table 2A--Simple Trusts
----------------------------------------------------------------------------------------------------------------
1. <$1.......................................................... 8 $800 $1,200
2. $1 to $5,000................................................. 8 800 1,200
3. $5,001 to $10,000............................................ 7 900 1,400
4. $10,001 to $50,000........................................... 7 1,200 1,800
5. >$50,000..................................................... 11 2,500 3,700
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Table 2B--Complex Trusts, Qualified Disability Trusts, Pooled Income Funds, Chapter 7 and 11 Bankruptcy Estates
----------------------------------------------------------------------------------------------------------------
1. <$1.......................................................... 8 1,100 1,400
2. $1 to $5,000................................................. 9 900 1,300
3. $5,001 to $10,000............................................ 8 1,200 1,700
4. $10,001 to $50,000........................................... 9 1,700 2,400
5. >$50,000..................................................... 18 4,600 6,400
----------------------------------------------------------------------------------------------------------------

[[Page 103930]]

Table 2C--Decedent Estates
----------------------------------------------------------------------------------------------------------------
1. <$1.......................................................... 16 2,500 3,400
2. $1 to $5,000................................................. 18 2,300 3,000
3. $5,001 to $10,000............................................ 18 2,900 3,800
4. $10,001 to $50,000........................................... 18 3,700 5,000
5. >$50,000..................................................... 21 6,000 8,000
----------------------------------------------------------------------------------------------------------------
Source: IRS:RAAS:KDA (11-18-2024).
* Grantor trusts are not reflected in this table because income from a grantor trust is generally reported on
the grantor's tax return.

Table 3--FY2025 Average Burden Projections by Number of K-1s Attached *
----------------------------------------------------------------------------------------------------------------
Average
Number of K-1s Average time Average out-of- monetized
(hrs.) pocket costs burden
----------------------------------------------------------------------------------------------------------------
Table 3A--Simple Trusts
----------------------------------------------------------------------------------------------------------------
0............................................................... 9 $1,000 $1,400
1-5............................................................. 8 1,300 1,900
6-10............................................................ 13 2,300 3,300
>10............................................................. 17 3,300 4,700
----------------------------------------------------------------------------------------------------------------
Table 3B--Complex Trusts, Qualified Disability Trusts, Pooled Income Funds, Ch. 7 and 11 Bankruptcy Estates
----------------------------------------------------------------------------------------------------------------
0............................................................... 9 1,200 1,600
1-5............................................................. 11 2,200 3,100
6-10............................................................ 20 4,300 6,100
>10............................................................. 26 5,800 8,100
----------------------------------------------------------------------------------------------------------------
Table 3C--Decedent Estates
----------------------------------------------------------------------------------------------------------------
0............................................................... 14 2,400 3,300
1-5............................................................. 20 3,800 5,100
6-10............................................................ 25 5,400 7,300
>10............................................................. 32 7,500 11,000
----------------------------------------------------------------------------------------------------------------
Source: IRS:RAAS:KDA (11-18-2024).
* Grantor trusts are not reflected in this table because they do not use Schedule K-1s. See Instructions to Form
1041, <a href="https://www.irs.gov/instructions/i1041">https://www.irs.gov/instructions/i1041</a>.

Authority: 44 U.S.C. 3501 et seq.

Melody Braswell,
Treasury PRA Clearance Officer.
[FR Doc. 2024-30066 Filed 12-18-24; 8:45 am]
BILLING CODE 4830-01-P

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