extension filed but no filing requirement?

[Kea]

When client sent info for extension, he included income his 2 children got from their trusts. Since older child got her 1st K1 in 2009, it appeared the 2010 income was of the same nature. Now that we are wrapping up, he has no K1s for either child. The trust is handled by his brother-in-law and has never issued any other K1s. It was my client's understanding that the trust took care of all the taxable issues. Could this happen, where no K1s need to be distributed?

I am not an expert on trusts. But if these were just distributions and not taxable to the kids, then no 1040 would be required. But if the extensions were filed showing several K in income, should I file $0 returns?

I am still waiting for him to confirm with his B-I-L that the distributions were not taxable. (The 2009 K1 did trigger kiddie tax last year.)

Thanks!

[JohnH]

Aside from the issue of whether there are K-1's required, I'd file returns in this situaiton even if no tax is due. IRS has the extension requests in their system, so a follow-up letter is likely if no returns are filed. More importantly, filing zero tax due returns will start the SOL running and they will be timely-filed. So if some sort of K-1 shows up in 2 months, 6 months, or several years from now, at the very least you would be amending a return that will not carry any FTF penalties.

[Kea]

That was why I was leaning to filing the 1040s. Just wanted confirmation.

Now to go check on e-filing a $0 return. It seems I remember that not being allowed.