Get your taxes done using TurboTax

To fix the vastly different amounts of tax that you are encountering, it will be necessary to manually make entries to ensure the calculations are correct.

Instead of importing the data into one return and using an adjustment to move half, and to ensure the capital gains and dividends are split, I recommend that you report exactly 50% of every community item on each individual return. 

To do this, take the following steps:

1. Go back to the Community Property section in both returns and remove the plus/minus adjustments you created so that your adjustment line on your 1040s are $0
2. Next, manually split the income sources
3. For every 1099-DIV, 1099-INT, and 1099-B, divide by 2
4. Enter 50% of the dividends/gains on your return and 50% on your spouse's return
5. Enter both W-2s on both returns, but only input 50% of the values for Box 1 (Wages), Box 2 (Federal Withholding), etc.
6. Note: Keep Social Security and Medicare boxes (3–6) matching the original W-2 for the person whose name is on the form
7. Use Form 8958 to reconcile, since your entries won't match what the IRS received from the banks/employers
8. In TurboTax Desktop, go to Forms Mode and open Form 8958
9. List the full amount in the "Total" column and show the 50/50 split between Spouse A and Spouse B to tell the IRS, "The 1099-DIV says $1,000, but because of CA law, I am only reporting $500."

By following the above steps, you will have the accurate split for your two returns.