1099 MISC

[bhomes]

Married couple A and B separate and file for divorce in early 2023.  A continues to have rental income deposited (met for both A and B) into her personal acct until it is then correctly deposited into a joint acct.  A got 75% into personal acct while 25% went into joint acct.  A gets a 1099 MISC  reporting all the rental income under her name/SSN.  How is the 1099 MISC income reported between A and B if they are MFS? 

[DianeW777]

Report the income on each return for the correct amount owned by each spouse.  If all of the income is reported to A on the Form 1099-MISC, then A can nominee the appropriate amount to spouse B.  See the instructions below.

Nominee Returns.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner. 
• Form 1096
• Form 1099-MISC

[bhomes]

In a divorcing couple (A and B) situation, A issues a nominee 1099 MISC but keeps B's portion of reported income.  What is B's recourse?  

[DianeW777]

Each spouse claims what they actually received in rents and the actual expenses each paid on their separate returns.  Keep your bank statements or other proof of income and expense.  See community property rules next if they apply.

Note:  If you live in a community property state the rules will be different.

Nine states have community property laws. Married couples in these states typically need Form 8958 if they file separate rather than joint tax returns:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

You must follow the state's rules when reporting community property income. Generally use your state's laws to determine whether a particular source of income is separate or community property because the IRS generally defers to each community property state's rules. The following links will help you decide how to allocate the income in TurboTax.  You may need to visit your state's website for specific income adjustments but you should start in the IRS publication to use a nice chart of Community Property and Separate Property.

• IRS Publication 555
• What is Form 8958?
• MFS in Community Property States