When does an irrevocable trust pay income tax?

The trust may pay tax on retained income, while distributed income may be reported by beneficiaries. Different tax results are possible depending on basis, ownership, beneficiary status, timing, and whether the amount represents principal or income. When preparing the return, trust taxation depends on whether the trust is revocable or irrevocable, who is treated as the owner, what income is retained, and what is distributed. Retain the documents that support the dates, amounts, ownership, and basis, and have a qualified tax adviser confirm who reports the amount, which form applies, what basis should be used, and when the filing is due.