IRS Form 5227 – Split-Interest Trust Information Return

IRS Form 5227 – Split-Interest Trust Information Return – In the complex world of trusts and charitable giving, IRS Form 5227 plays a crucial role for organizations and trustees managing split-interest trusts. This form ensures transparency in financial activities, charitable distributions, and compliance with tax regulations. Whether you’re a trustee of a charitable remainder trust or a pooled income fund, understanding Form 5227 is essential to avoid penalties and maintain proper reporting. This guide covers everything you need to know about filing IRS Form 5227 for the 2025 tax year, based on the latest IRS guidelines.

What Is IRS Form 5227?

IRS Form 5227, known as the Split-Interest Trust Information Return, is an annual filing required for certain trusts that benefit both charitable and non-charitable parties. It reports the trust’s financial activities, including income, deductions, distributions, and assets. Additionally, it provides details on charitable deductions and helps determine if the trust is subject to private foundation excise taxes under Chapter 42 of the Internal Revenue Code. The form replaces older filings like Form 1041-B for charitable remainder trusts and Form 1041-A for other split-interest trusts.

Split-interest trusts are unique because they divide benefits between charitable organizations (like nonprofits) and non-charitable beneficiaries (such as individuals). This dual purpose requires detailed reporting to ensure tax deductions are properly claimed and excise taxes are assessed where applicable.

Who Must File Form 5227?

Not all trusts need to file Form 5227—it’s specifically for split-interest trusts under section 4947(a)(2) of the Internal Revenue Code. Key filers include:

  • Charitable Remainder Trusts (CRTs): Described in section 664, these include Charitable Remainder Annuity Trusts (CRATs) and Charitable Remainder Unitrusts (CRUTs), which pay a fixed amount or percentage to non-charitable beneficiaries before the remainder goes to charity.
  • Pooled Income Funds: As defined in section 642(c)(5), these funds allow donors to contribute assets, receive lifetime income, and leave the remainder to charity.
  • Charitable Lead Trusts (CLTs): These pay income to charities first, with the remainder going to non-charitable beneficiaries.
  • Other Split-Interest Trusts: Any trust not fully exempt under section 501(a) that has unexpired non-charitable interests and qualifies for charitable deductions on post-May 26, 1969, contributions.

If your trust meets these criteria, filing is mandatory for each calendar year. Trustees or fiduciaries are responsible for submitting the form.

Exceptions to Filing Form 5227

There are limited exceptions to ease the burden on older trusts:

  • Trusts created before May 27, 1969, with no post-1969 contributions that qualified for charitable deductions.
  • If a pre-1969 trust receives a qualifying post-1969 transfer, filing begins from that year onward.

Always review your trust’s governing documents and contribution history to confirm eligibility for an exception.

When and Where to File Form 5227?

For the 2025 tax year (calendar year trusts), the due date is April 15, 2026. If the trust operates on a fiscal year or is filing a final short-year return due to termination, file by the 15th day of the fourth month after the period ends.

Mail paper returns to:

  • U.S. Postal Service: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027
  • Private delivery: Internal Revenue Service Center, 1973 Rulon White Blvd. M/S 6054, Ogden, UT 84201

For trusts outside the U.S., use the same addresses. Electronic filing is mandatory if you file 10 or more returns annually (effective for tax years ending on or after December 31, 2023). Request extensions using Form 8868 by the original due date.

How to File: Paper vs. Electronic Filing?

  • Paper Filing: Complete the form using the official PDF from the IRS website. Do not include Social Security Numbers (SSNs) on publicly disclosed parts; certain schedules like Schedule A are confidential.
  • Electronic Filing: Required for high-volume filers. Use IRS-approved software or e-file providers. This streamlines the process and reduces errors.

Gather financial statements, beneficiary details, and actuarial data before starting. Related forms may include Form 1041 for income tax or Form 4720 for excise taxes.

Penalties for Not Filing Form 5227

Failing to file on time can result in significant penalties under section 6652(c)(2)(C):

  • $25 per day (max $13,000) if the trust’s gross income is $327,000 or less.
  • $130 per day (max $65,000) if gross income exceeds $327,000.
  • Additional $10 per day (max $6,500) if the IRS demands filing and you ignore it.

Penalties also apply for incomplete or fraudulent returns, or failing to provide Taxpayer Identification Numbers (TINs) to beneficiaries ($50 per failure). Timely filing is critical to avoid these costs.

Understanding Split-Interest Trusts: Key Definitions

To file accurately, familiarize yourself with these terms:

  • Charitable Remainder Annuity Trust (CRAT): Pays a fixed annuity (at least 5% but no more than 50% of initial fair market value) for up to 20 years or lifetimes.
  • Charitable Remainder Unitrust (CRUT): Pays a percentage (5-50%) of annual fair market value; variants include Net Income CRUT (NICRUT) and Net Income with Makeup CRUT (NIMCRUT).
  • Charitable Lead Trust (CLT): Charity receives income first; non-charitable gets the remainder.
  • Pooled Income Fund: Managed by a charity, providing income to donors with remainder to the organization.
  • Disqualified Person: Includes substantial contributors, managers, and family members—important for avoiding self-dealing.

These trusts are treated as private foundations for certain excise taxes, making Form 5227 essential for compliance.

Key Parts of Form 5227

Form 5227 is divided into several parts to capture comprehensive data:

  • Part I: Income and Deductions – Reports ordinary income, capital gains, nontaxable income, and deductions.
  • Part II: Schedule of Distributable Income (for section 664 trusts) – Tracks income categories, including net investment income.
  • Part III: Distributions for Charitable Purposes – Details principal and income given to charities.
  • Part IV: Balance Sheet – Lists assets, liabilities, and net assets (CRUTs use fair market value).
  • Parts V-VI: Specific Trust Information – Annuity/unitrust details for CRATs and CRUTs.
  • Parts VII-IX: Statements and Questionnaires – Covers activities, potential Form 4720 triggers, elections, and foreign accounts.
  • Schedule A: Distributions, Assets, and Donor Information – Confidential section on beneficiaries, donors, and accumulations; includes options for simplified net investment income calculation (SNIIC).

Use the form’s schedules to report detailed breakdowns.

Recent Changes for the 2025 Tax Year

For 2025, key updates include:

  • Mandatory e-filing for those submitting 10+ returns, per Treasury Decision 9972.
  • Availability of the Simplified Net Investment Income Calculation (SNIIC) election for CRTs to ease net investment income tax reporting.
  • Elections for net investment income tax (NIIT) treatment of certain foreign income.
  • Updated deadlines and addresses, with Form 5227 fully replacing prior forms.

These changes aim to modernize filing and improve accuracy.

Tips for Successfully Filing IRS Form 5227

  • Consult Professionals: Work with a tax advisor or attorney experienced in trusts to ensure accuracy.
  • Maintain Records: Keep detailed financial and beneficiary records for at least three years.
  • Check for Related Filings: You may also need Form 1041, Form 4720, or beneficiary K-1s.
  • Use IRS Resources: Download the form and instructions from irs.gov for free.
  • Avoid Common Errors: Double-check calculations, especially for fair market values and distributions.

By staying organized, you can navigate Form 5227 with confidence.

In summary, IRS Form 5227 is vital for maintaining compliance in split-interest trusts. Proper filing not only avoids penalties but also supports charitable goals. For the most current details, always refer to official IRS publications. If you’re managing such a trust, start preparing early for the April 15, 2026, deadline.