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

[lotoftaxes123]

@PutThatCookieDown This was key information. So if I understood right from taxslayer and you, here are the steps assuming 2 W2s for John and Jill

John's MFS fed return

1. Add both John and Jill W2 to the software.
2. For each W2, don't change employer information but divide only Box 1 and Box 2 by half (i.e 50%)
3. Keep other boxes for John's return as in and the other boxes for Jill's empty 
4. Divide other community deductions and credits by half as well

Do the same as John above but with John and Jill exchanged in the points above

Fill out  Form 8958 and attach to the both returns.

Questions
1. TuroboTax a a screen which says community property addition and subtraction which affects the tax return. From the aobe I qould assume to leave that blank.
2. The following screen shows the entires to fill out in 8958 which should be taken care of automatically.

3. What should I do here for state? Does turbotax handle this automatically? Also, should i send 8958 to  California state as well if I file manually?

[PutThatCookieDown]

@lotoftaxes123 Yes, for 1) enter both of John and Jill's W2s in EACH spouse's return. For 2) you only divide by 50% if 100% of your residency for 2023 was spent in community property states. It gets a bit involved if one or both of you resided in a non-community property state for either all or part of the year, but since you didn't mention it, I am assuming 100% of your time was in community property states, so yes, 50% for box 1 and box 2, AND ALSO do that for the state income and witholding. 3) Correct. 4) This is true for those that can be divided. IRS rules for certain credits and deductions can only be claimed by 1 spouse, such as the EV credit.

Question 1 - Yes leave that blank. This appears to be for dividing income not addressed on W2s or other common income forms.

Question 2 - No, it's not completely automatic. When dividing W2 income in this section, you have to enter your spouse's portion in the spouse column and make sure the total equals what is on the original (100%) amount on the W2.

Question 3 - When entering the state return info, each state is different but you will be asked questions regarding allocation of income. Just make sure that it is allocating the same as the Fed return. I don't know the answer about filing manually since I filed electronically, but if you do this correctly there should be no need to file paper. All my returns were accepted, processed, approved, and payments/refunds completed.

Hope this helps.

[lotoftaxes123]

@PutThatCookieDown That was a fast response!

State filing in is California.

1. Understood on splitting state wages and withholding as well. It doesn't make sense otherwise.
2. For splitting income, i see two methods in the internet. Which option did you use?

Option A: For John's return, add both John and Jill's W2 to the software and in EACH W2 divide by half the boxes as you described 

OR

Option B: For John's return, add both John and Jill's W2 to the software. Now total the boxes for each W2, divide by 2 and THEN enter the same number(since you dived total by half) in each W2 box. This will make the numbers in each W2 the same.

3.  For things like stock sales, dividend, interest, I was thinking of just dividing them by 2 and adding to each return while disclosing that in 8958. I will attach those to each person's return the appropriate documents with the actual name of the person who got the 1099-DIV/B/INT with half the numbers

On "Question 2 - No, it's not completely automatic. When dividing W2 income in this section, you have to enter your spouse's portion in the spouse column and make sure the total equals what is on the original (100%) amount on the W2."  When you say spouse's portion , do you mean the W2 with spouse employer or the total W2 info from the spouse's return?

[geyergirls]

I saw your post and since it appears your returns were accepted, I'm hoping you can answer a few quick questions. When you entered the W2 information, did you divide all income and all federal taxes in half on each W2? In other words, when you entered your own W2 on your tax return, did you enter 50% income and 50% taxes, followed by entering your spouse's W2 in your name but with your spouse's employer info and following the same format with the 50/50 split? I'm also wondering if you ever determined how to complete boxes 7-20 on the W2. In the response you posed from TaxSlayer, it states to keep boxes 3-6 if it is your W2, but when entering for your spouse on your tax return, to leave boxes 3-6 blank. What about the other boxes? Lastly, when you filed with Turbo Tax, were you able to e-file with form 8958? The form was already completed based on your input in the tax returns and then filed with both tax returns for you and your spouse? I've spent countless hours researching this topic and the information out there is fairly bleak! Thanks for your help!

[PutThatCookieDown]

@lotoftaxes123 I used Option A. If you divide the amounts on each W2 by itself, it would come out to the same result as Option B but its less confusing and at least you can more easily understand how you got to the final numbers. It would also be easier for the IRS to figure out what you did with Option A. I don't like lumping numbers together like Option B only to try to reverse engineer what I did if I ever needed to explain it later.

For things like stock sales, dividend, interest, it's the same thing; divide the income between spouses on the 1099 just as you did with the W2. In the Community Property Section on Turbotax, there are also sections for Interest and another for Dividends to confirm the allocations to complete the 8958.

On "Question 2", ALL W2s from all employers from you and your spouse should be listed here if you entered the W2s correctly. There are 3 columns in the Wages section in the Community Property Section; one for you, spouse, and Total. You have to enter the spouse portion manually in the Spouse column and then make sure the Total equals the amount on the unaltered W2, as well as confirming that the total also equals the sum of the columns for you and spouse.

Hope this answers your questions.

[PutThatCookieDown]

@geyergirls Yes, assuming you spent all of 2023 in a community property state(s), the income and withholding for Fed, SS, Medicare, State, and local is divided equally in half on the W2. Yes, you put YOUR name on the spouse's W2 in your return, and vise versa in your spouse's return for your W2s. For Boxes 7-15 (16-20 is handled same as 1-6), you should still divide these by half since, for instance, it helps to show why you may have a different Box 1 from Box 3 and 5, but generally 7-15 don't affect final tax calculations so it is not as critical. Yes, Turbotax completed Form 8958 and e-Filed for me but only after I, myself had to spend countless hours also figuring out how Turbotax wanted me to enter it into its program. If you mess with the first 2 screens of the Community Property Section, it will do screwy things to your final calculations or make you paper file. But if you just have wages, interest, or other common income, leave those first 2 screens blank and fill out the remaining screens. It seems the software engineers and the Turbtotax advisers didn't communicate well on this section and we were left to fend for ourselves with so many generic answers out there. Finally, just remember that the Community Property Section in Turbotax (which is what completes the 8959) will have you confirm your and your spouse's allocations. It does require some tweaking since it doesn't know what your spouse's allocations are; it only knows yours since you altered the W2 and 1099s when you entered them. Make sure the sum of your and your spouse's allocations equals the total that should match the original unaltered W2 or 1099.

Hope this answers your question.

[lotoftaxes123]

@PutThatCookieDown For 1099 DIV/B/INT of the spouse, do we have to change recipient name to filer's name similar to what we did in W2s?

[PutThatCookieDown]

@lotoftaxes123 The short answer is yes, put your name on the spouse’s 1099 in your tax return. The longer answer is that TurboTax only puts the name of the filer on any form that you enter anyway so you don’t have a choice. As long as the data you enter matches on your spouse’s return and the 8958 explains it all, it should all be fine.

[selfreporter]

@PutThatCookieDown @lotoftaxes123 Could you help suggest how 1099-B entries can be split between the two RDPs? Do you still enter all sales and divide cost vs sale by 2?

And is it possible to just split the W2 as described in the post and then leave the rest as-is but use a final community property adjustment (one positive and another negative) to adjust the final split so that it can reflect both the separate income + deductions?

[RobertB4444]

For the first, yes.  

For the second, I'm not sure what the second community property adjustment that you're referring to is but as long as form 8958 reflects an even split between partners then you're fine.

@selfreporter