My wife and I are Married Filing Separately in California, which is a community property state. How should I enter the W-2 forms on both of our taxes?
It looks like I need to report all of our W-2 forms on each of our tax returns, and manually divide the values in half. Is that correct? It also looks like TurboTax forces me to report my wife's W-2s as mine on my return, and my W-2 as my wife's on my wife's return? (Attempting to manually check the form as belonging to my spouse causes TurboTax to report this as an error, which sort of makes sense, but I just wonder if this is going to end up confusing the IRS if TurboTax reports the W-2 with the incorrect employee SSN.) If I enter the actual full values from the W-2 (without dividing in half) it looks like TurboTax would double-report our income earned.
I know that I also need to fill out the community property worksheet for form 8958, but it looks like this doesn't affect the income numbers reported on form 1040 computed from the W-2 values, which is what makes me think I need to manually divide the W-2 numbers in half when entering them.
In the past we have filed with a CPA, who has reported half of the income and withholdings on each of our returns, along with form 8958 explaining the allocation, as well as a supplemental information form explaining the split.
Also, before anyone comments, I am fairly certain that MFS will result in a lower tax than MFJ in our situation. California has some (uncommon) state taxes where the income limits are somewhat unfortunately not doubled when filing jointly, making it beneficial to file separately.
