How do I enter my spouse's W-2 when filing Married Filing Separate in a Community Property state like California?

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I have seen threads on Turbotax from 2021 saying NOT to change the information in a W-2 even though both TaxAct and TaxSlayer say to do exactly that. On my return, how exactly should I enter the W-2s for my spouse?

[DawnC]

It works similarly in TurboTax.   Filing taxes in community property states (California) as Married Filing Separately (MFS) can be complex.

You may not be able to e-file, in which case TurboTax will guide you through the steps to print and mail your return.  

Begin by completing a MFS federal tax return for you and your spouse, as you'll need the amounts for different income categories, tax amounts, and all tax payments for each of you.   If one of you plans to itemize deductions, the other person must itemize as well. Otherwise, you'll both have to use the Standard Deduction.

Entering income adjustments for a community property state

Complete the community property worksheet

Finish your tax returns

From Married Filing Separately in California

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I am still unsure from this on how the W-2s for a spouse are entered. Can someone give me a detailed explanation of what to do?

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@DawnC Why doesn’t TurboTax give any clarity on this topic? Every instruction, link, or response is vague regarding how to handle the spouse’s W-2. The TurboTax Desktop instructions in the Community Property section don’t address what to do with the spouse’s W-2 either. It just asks you to do additions, subtractions, and to allocate the income. I already know the IRS and CA rules for allocating community property. I just need someone from TurboTax give a clear answer on exactly how TurboTax wants me to enter my spouse’s W-2 in their program.

[MarilynG1]

You don't enter your Spouse's W-2 in your return; they enter it in theirs.  You just need to enter half of their total income in your return (and vice versa); hence all the rules for allocating.

Basically, you should each prepare your MFS returns and take the data you need from each other's returns.

Here's more detailed info on MFS in Community Property States. 

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@MarilynG1 Thank you for being precise on this answer. The only question I have remaining would be about entering the adjusted tax withholding. If I do it the way you are saying in the community property section, TurboTax is telling me that I will have no choice but to paper file. And then I would be curious why TaxSlayer would instruct to actually enter a modified spouse W-2 which suggests avoiding paper filing:

1. You will be required to claim half of the total income and half the total tax withholdings for each W-2 on your return. Change the amount in Box 1 to reflect one-half of the total community income for wages. Change the amount in Box 2 to reflect one-half of the total federal tax withholdings. If the W-2s are originally the spouse's W-2s, leave boxes 3-6 blank. If the W-2 is  issued to you, report boxes 3-6 as it was reported on your W-2.

https://support.taxslayer.com/hc/en-us/articles/360019084471-How-do-I-complete-the-Married-Filing-Se...

I can’t imagine the IRS and CA allow different tax software to file differently and I would prefer not to paper file if possible.

[MarilynG1]

You could try entering the W-2 info as you suggested, and you may then not have to paper file.  It's worth a try.

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@MarilynG1 Here is a detailed answer that I was looking for:

https://www.taxact.com/support/21322

/2023/community-property-states-mfs-how-to-file-with-taxact?hideLayout=False

I had to cut the link in half because the forum keeps removing it. Just combine both lines above into one URL to navigate.

Can TurboTax please post something detailed like this?

[DianeW777]

TurboTax does have an article detailing filing separate in a Community Property State. Also the IRS has a publication specifically for this purpose.  This will help you with your own situation.

• MFS in Community Property States  
• About Publication 555, Community Property   (Start with the table on page 4)
• Allocation Of Community Property and States

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[PutThatCookieDown]

@DianeW777 In all those links you sent, TurboTax did not once explain in detail how to physically input the W2s like other tax software does. TurboTax just gives the general rules for income allocation. Please see the link I included from TaxAct above to see the difference in a detailed and helpful answer.

[Rajshree7]

Hi, did you end up filing with TurboTax? If yes, I think you followed W-2 method as directed by Tax Act.  How did you file Form 8958 in TurboTax?

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@Rajshree7 I did file with Turbotax but I followed the directions on taxact and taxslayer. The IRS accepted both our returns but it’s too early to know if it’s good until the IRS processes them. TurboTax automatically filled in the Form 8958 when it asked if I had Community Property adjustments to make. The only thing I had to do was fill in the column that allocated which portion of income was my wife’s. Because I already entered the modified W2s previously, it already had my allocations correct. I know my math is all good and the income is divided properly when I filed. I will have to wait a couple weeks and see if they get processed.

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@Rajshree7 So I see California just processed and approved both returns but the IRS still shows "processing." I guess this is a good sign so far that it was the correct way to do it.

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@Rajshree7 so good news. The IRS and state have both processed my returns and refund/payments are done. I will say I’m a little annoyed how much research I had to do from competing tax software companies to figure out the right way to submit this in the software. TurboTax really needs to publish a more detailed ”software instructions” explaining how they want us to enter the information into their program for community income and not just give AI style generalities about how the tax authorities want you to divide the income. AI really is like the “is it turned on” type technical support that is so unhelpful.

[Rajshree7]

@PutThatCookieDown  thanks a lot for this!