So my Mom setup a trust for my son's education. In 2022, we withdrew 25K from the trust. I claimed it on my taxes since it was for my son's benefit. Probably wrong thing to do.
We recently got a letter from the IRS that my Mom had 25K of unreported income in 2022 and they want their share and penalties. It's obviously the 25K I withdrew from the Trust (being the Trustee).
How do I resolve this? Talking on the phone is almost impossible with very lengthy wait times. Is there some form I could send in showing that *I* paid taxes on this money?
Trust Disbursement Question – IRS Says it was My Mom's Income
byu/zephead98 intax
Posted by zephead98
1 Comment
Who is the trustee of the trust? And what kind of trust is it? Trusts come in all types and to make a determination one needs to read the trust documents. Grantor trusts are taxable to the grantor, whereas other trusts might be directly taxable to the trust or to the beneficiary. (i.e. your son)
How did the IRS even know of this? Someone issued your mother a Form 1099?
No one can answer this question until we know more.
More than likely this is a grantor trust, but we do not know that with the facts presented.
Honestly, with trusts you should see a professional.