If a trust pays an individual trustee $600 or more during the year for their services, the trust has to issue a 1099 for those trustee fees, specifically Form 1099-NEC. The trust is the payer, files under its own EIN, and owes the trustee a copy by January 31. One big exception cuts a lot of trusts out of this obligation entirely: payments to a corporate trustee, such as a bank or trust company, generally don’t require a 1099 at all.
The $600 Rule
The threshold is simple. Total up everything the trust paid a given trustee for services during the calendar year. If it hits $600 or more, a 1099-NEC is required.1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) Under $600, no form is needed, though the trustee still owes tax on whatever they received.
Who the trustee is doesn’t change the answer. A licensed professional fiduciary, an attorney serving as trustee in an individual capacity, a family member managing a relative’s trust — all of them get a 1099 if paid $600 or more. The test is whether the payment is compensation for services.
The trust itself is the reporting entity and must use its own Employer Identification Number on the form, not the grantor’s Social Security Number or a beneficiary’s.2Internal Revenue Service. File an Estate Tax Income Tax Return A trust that doesn’t have an EIN needs to apply for one before it can file.
When a Corporate Trustee Is Exempt
The IRS generally exempts payments to corporations from 1099 reporting. That covers banks, trust companies, and LLCs that have elected to be taxed as C or S corporations.1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) If the trust’s trustee is a corporate entity, no 1099-NEC is required for the fiduciary fees.
Two narrow exceptions to the corporate exemption exist: attorneys’ fees for legal services (always reportable) and payments made by federal executive agencies. Neither one reaches ordinary trustee compensation paid to a bank.1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
The way to confirm this is the trustee’s Form W-9. If the trustee checked the C corporation or S corporation box, skip the 1099-NEC for the trustee fee. If the trustee is an individual, sole proprietor, partnership, LLC taxed as a partnership, or estate, the $600 threshold applies and the trust must report.
Why 1099-NEC and Not 1099-MISC
Trustee fees go on Form 1099-NEC, in Box 1 (Nonemployee compensation).1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) Form 1099-MISC covers a different set of payments — rent, royalties, and similar categories — and does not belong here. Using the wrong form is a common source of IRS notices.
What Counts as Reportable Compensation
Only fees paid for fiduciary services go on the 1099-NEC. That means what the trustee earned for administering the trust: managing investments, handling distributions, tracking accounts, and the rest of the fiduciary role. Two other kinds of payments often get bundled in with the fee and need to come out.
Reimbursed Expenses
Substantiated reimbursements — where the trustee submitted receipts or records for legitimate trust-related costs — are generally not taxable and don’t go on the 1099. The word doing the work is “substantiated.” If the trust just paid a lump sum covering fees and expenses together without documentation, the full amount is treated as compensation and the full amount gets reported. Family trusts with informal recordkeeping run into this often.
Beneficiary Distributions
A trustee who is also a beneficiary may receive both a service fee and a distribution. These are separate payments on separate forms. Income distributions flow through Schedule K-1 of the trust’s Form 1041.3Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025) Only the service fee itself belongs on the 1099-NEC.
Get the W-9 First
Before issuing any payment, the trust should collect a completed Form W-9 from the trustee. The W-9 supplies the legal name, address, entity classification, and Taxpayer Identification Number needed for the 1099. If the trust doesn’t have a valid W-9 on file, it has to withhold 24% of each payment as backup withholding and send it to the IRS.4Internal Revenue Service. Form W-9 (Rev. January 2026)
On the 1099-NEC itself, the trust’s name, address, and EIN fill the payer fields. The trustee’s W-9 information fills the recipient fields. The total taxable compensation goes in Box 1. For most trusts, that’s the only dollar entry on the form.
The name and TIN on the 1099 have to match IRS records. A mismatch triggers a penalty notice. The IRS offers a free TIN Matching Program that lets a filer verify name-TIN combinations in advance and head off correction cycles.5Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
Deadline and How to File
Form 1099-NEC has one deadline for both copies. The copy to the trustee and the copy to the IRS are both due January 31 of the year following payment. If January 31 falls on a weekend or holiday, the deadline moves to the next business day. For the 2025 tax year, January 31, 2026 is a Saturday, so the deadline is Monday, February 2, 2026.6Internal Revenue Service. 2026 Publication 1099
Paper filing requires Form 1096 as a transmittal cover.7Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns But paper is only allowed if the trust is filing fewer than 10 information returns in total across all form types for the year. At 10 or more, electronic filing is mandatory.8Internal Revenue Service. E-file Information Returns
For electronic filing, the IRS IRIS Taxpayer Portal is free and browser-based; you can key in data or upload a spreadsheet. The older FIRE system also handles 1099s but needs commercial software.9Internal Revenue Service. E-file Information Returns With IRIS Either route requires a Transmitter Control Code, which has to be obtained before the first filing.
Penalties for Missing or Botching the Filing
The IRS penalizes both the failure to file a correct return with the agency and the failure to furnish a correct copy to the recipient, and those are separate assessments. Amounts scale with how late the fix is:10Internal Revenue Service. 20.1.7 Information Return Penalties
- Corrected within 30 days of the due date: $60 per form.
- Corrected after 30 days but before August 1: $130 per form.
- Corrected after August 1 or not filed at all: $340 per form.
- Intentional disregard: $680 per form, with no annual cap.
The intentional-disregard tier is the one to avoid. A trust that knows a 1099 is required and skips it faces $680 per form with no ceiling, and the IRS can instead impose 10% of the unreported amount if that number is larger.
The Trust’s Deduction for the Fee
The trust that reports the fee also deducts it. Trustee compensation is a cost that exists only because the property is held in trust, which makes it a Section 67(e) deduction the trust takes above the line on Form 1041. The Tax Cuts and Jobs Act suspended most miscellaneous itemized deductions through 2025, but the regulations state that Section 67(e) deductions are not miscellaneous itemized deductions and remain fully deductible.11eCFR. 26 CFR 1.67-4 – Costs Paid or Incurred by Estates or Non-Grantor Trusts So the same fee the trust reports on the 1099-NEC comes off its taxable income on the 1041.