Those small businesses using partnership or S-Corporation formats issue Form K-1 to the respective owners. When income is assigned to the owner and there is no corresponding cash related to that income, then this income is referred to as ‘Phantom Income’. In effect, it is assigned income for tax purposes without the corresponding cash to pay the tax liability.
Estate taxation is a process promulgated by the Internal Revenue Service to address the taxation of the deceased individual. Forms 706 (Estate Tax Return) and Form 1041 (Annual Income Tax Return of the Deceased) are the two primary documents in dealing with the estate of the deceased.
When an individual passes away, his/her will or trust identifies a representative to administer his/her estate. This representative is referred to as the executor (male) or executrix (female) and is generally approved or assigned by the local circuit court. The Internal Revenue Service tasks this representative to file a final personal return and information returns until the estate is completely transferred to the heirs.