Fiduciary Returns on Form RI-1041

The Rhode Island Division of Taxation has resolved an issue involving certain fiduciary income tax returns filed on Form RI-1041 for the 2016 tax year.

For certain such returns, which showed a balance due and which were accompanied by a payment, the payments were not properly credited to the account. As a result, the Division mailed a notice to the filers, asserting that the filers owed tax, interest, and penalty.

Proactive step

When the Division of Taxation’s Front Office learned of this matter several days ago, the Division immediately responded by creating and implementing a change to its computer system. As a result:

• The affected accounts are being automatically credited with the payments that the taxpayers had previously made, covering the 2016 tax year;
• The interest, penalty, and balance due, as shown on the notices that the filers received in recent weeks, will automatically be deleted from the taxpayer’s record; and
• Filers who made payments in response to the notice will receive a refund.

In perspective

The Division of Taxation processes more than 650,000 income tax returns each year. The Division estimates that approximately 1,600 returns were affected by the matter at issue, mainly fiduciary income tax returns filed on Form RI-1041 on behalf of certain trusts and estates – in other words, only a small fraction of the total. Nevertheless, each taxpayer is important, so it is imperative that the Division provide guidance for any fiduciary or tax professional involved in this matter.

Filers of the affected returns will be able to disregard the notice they had received and need take no further action. However, if a filer receives a second notice, the filer should contact the Division (because the second notice could be a sign of an underlying issue with the return itself).

Anyone with questions should contact the Division by email. Put “Form 1041” in the message header and send the email to:Tax.Assist@tax.ri.gov. Or call the Division at (401) 574-8829 and choose option #3. The Division will also mail a letter to each affected filer, providing a brief explanation and contact information.