On Form 8958, a couple lists individual sources of income for each of them, such as employers, banks that pay interest, stocks that pay dividends, capital gains and tax refunds. The couple reports the total amount received from each source, then allocates a portion of the total to each person.
Form 8958 essentially reconciles the difference between what employers (and other income sources) have reported to the IRS and what the spouses will be reporting on their federal tax returns. Both spouses must include a copy of the form with their tax return. From What is Form 8958?, click the link for full document.
Tips for those filing separately in community property states can be found here.
When filing a separate returns in California, each spouse reports the following:
- One-half of the community income (earnings from jobs and businesses (S-corps)
- All of their own separate income
Community income can include real estate, as well as salaries, wages and other payments you receive for services. Community income is part of community property, which are assets or other property held in common by married couples in community property states. California follows the rule that all assets acquired during a marriage are considered co-owned equally by each spouse. This marital property includes earnings (community income), all property bought with those earnings as well as all debts accrued during the marriage.
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