N-405: Tax on Accumulation Distribution of Trusts (2024)
Hawaii · Hawaii DoTax · Used for tax years 2024
Hawaii Form N-405 calculates a trust beneficiary’s additional tax on a distribution of income the trust accumulated rather than distributed each year. It uses the distribution amount, taxes paid by the trust, and the beneficiary’s earlier-year taxable income to figure the partial
Who files this form
Use Form N-405 if you received a distribution in 2024 from a trust that accumulated income instead of distributing it to you each year, and the trust paid taxes on that income. The form computes any additional tax liability.
For tax years beginning after August 5, 1997, this tax does not apply to most domestic trusts. It applies to foreign trusts, certain domestic trusts that were once foreign trusts, and certain domestic trusts created before March 1, 1984.
If you received accumulation distributions from more than one trust, prepare a separate Form N-405 for each trust.
What you'll need
- Completed Part IV of Schedule J (Form N-40). The trustee must give this to you so you can complete Form N-405.
- Taxable income and income tax records for 2019 through 2023. Use amounts as reported, amended, corrected, or changed by the Hawaii Department of Taxation, as directed for each line. Include relevant prior accumulation distributions when determining taxable income.
- Tax Tables or Tax Rate Schedules for the earlier computation years. Prior-year forms and Tax Rate Schedules are available from any taxation district office.
- Forms for any credits you refigure. Attach the proper credit forms.
- Identifying information. The form asks for your name, Social Security number and date of birth, plus the trust's name, mailing address, federal employer identification number and domestic or foreign status.
How to file
Attach Form N-405 to the beneficiary's current income tax return. If line 26 is greater than zero, add that amount to the return's total tax liability before tax credits.
Attach the proper form for any credit you refigure. If you received accumulation distributions from multiple trusts, prepare a separate Form N-405 for each trust.
The supplied text does not give a mailing address or e-filing instructions.
Common mistakes
- Assuming there can be only five throwback years. The form specifically notes that there can be more than five.
- Leaving out years on line 13. Enter taxable income for all five years, 2019 through 2023, even if the trust accumulated income for fewer than five years after you became 21.
- Entering negative adjusted taxable income on line 13. Enter zero instead.
- Using the wrong year's tax rates on line 17. Use the rates in effect for the earlier tax year shown in each column.
- Forgetting credit attachments. Attach the proper form for any credit you refigure.
Questions people ask
What does Form N-405 calculate?
It calculates the beneficiary's partial tax under section 667 on an accumulation distribution from a trust.
Which three years do I use in Part II?
Start with the taxable incomes for 2019 through 2023 on line 13. Eliminate the highest and lowest taxable income years, and enter the remaining amounts on line 14. Enter each applicable year in its column heading.
What if I received distributions from several trusts?
Prepare a separate Form N-405 for each trust. You may arrange the distributions in any order you want them considered to have been made.
What if the partial tax on line 26 is negative?
Enter zero. Only an amount greater than zero is added to the beneficiary's current income tax return's total tax liability before credits.