I'm married filing jointly, and I moved from NJ to PA this year but my wife didn't. How do I handle state returns?

[wbeers]

We have three sources of income: her W-2 (all earned while resident in PA); my academic fellowship from an institution in NJ (earned all year, before and after I moved from NJ to PA); and a 1099-DIV (her investment earnings).

[JoeB2 · Accepted solution]

If you and your spouse are filing a joint federal return but you work in or are residents of different states, you may need to file separate state returns.

Sometimes this is required by state tax law; other times it is to your best interest to not include your non-resident spouses income on your state return. Otherwise both states may try to tax the same income.

You can use TurboTax Online to file separate state returns, but we recommend you use the CD/Download software version to do this because you'll only need to pay for one TurboTax product (you can file up to 5 returns).

Tip: If you already started your return in TurboTax Online, we recommend that you transfer your tax file to the CD/Download version. You will save time by entering less information.

Here's a brief overview of the procedure, see the sections below for detailed steps:

1. You'll prepare one married filing jointly (MFJ) return to file with the IRS.
2. Prepare a "mock" married filing separate (MFS) tax return for each taxpayer. This is for your records only, and will be used to generate separate state returns for each person. the mock federal returns are Not filed.
3. Then for the first taxpayer, label and use the first "mock" married filing separate (MFS) federal return to prepare their state MFS return, using only their income and their half of the deductions from the MFJ federal return..
   This ensures that TurboTax only transfers the first taxpayer's income to their married filing separate state return. File this MFS state return, but not the mock federal return that it pulls the information from.
4. For the second taxpayer (spouse), label and use the second "mock" MFS federal return to prepare their state MFS return, again using only their income and their half of the deductions from the MFJ federal return.
   Again, file the second MFS state return, but not the second mock federal return that it pulls the information from.

Be sure to name each TurboTax federal return so you know the MFJ federal return to file, and which mock MFS federal and state return is for which person.
Yes, this can be tedious, but this is often the best way to ensure you accurately minimize state tax situations with two different state incomes.

Note:  State returns prepared using the "Mock" federal returns will require you to print and file your state return by mail, please click here to learn more. 

For detailed instructions, click the link below for the taxpayer(s) that need to file a state return.

Prepare a state return for the primary taxpayer

The primary taxpayer is the first taxpayer listed on the return. In the TurboTax CD/Download version:

1. Open your completed Married Filing Jointly (MFJ) return (the real return you'll file with the IRS), and
2. Then save it with a new file name, for the primary taxpayer.
3. This will be your "mock" federal MFS return used for the real MFS state return This mock federal return is Not Filed..

Very Important! This renaming step ensures that your original joint return (the one you file with the IRS) remains intact for you records. The "mock" federal tax return you create next will be used to remove the secondary taxpayer's data so it doesn't transfer into the primary taxpayer's state return. Otherwise, you'll end up paying tax twice on that income. Continue in TurboTax:

1. On Personal Info, click You & Your Family, then scroll down to the Your Filing Status topic and click Edit.
2. On the Review Your Filing Status screen, check Change my filing status and select Married filing separately, then click Continue.
3. Revisit the income topics in your federal return to remove all income items that belong to the secondary taxpayer (e.g., Forms W-2 or 1099).
   Also remove all deductions that apply to the secondary taxpayer (e.g., medical or educational deductions). You'll also need to determine how to split any joint deductions, be careful not to miss any, or use any deductions twice!
4. Now run the federal error check (Review > Analysis). When finished, you have the primary taxpayer's mock return.
5. Click State Taxes (this pulls the state data from this mock return) and complete the primary taxpayer's state return.
6. When finished, print the state return for your records and paper-file the primary taxpayer's state MFS return.

Important: Do not file the "mock" MFS federal return you created here. It was only used to separate the primary taxpayer's income and deductions for state tax purposes. However, do not delete the return in case you need to view or amend the primary taxpayer's associated state MFS return.

Prepare a state return for the secondary taxpayer (spouse)

The secondary taxpayer is the second person listed on the return.

Like the steps above, you'll create a second new "mock" federal MFS return for the secondary taxpayer. This is the only safe way to keep the two mock federal returns connected with the correct state returns.

1. In TurboTax (CD/Download version), start a new return by choosing New Tax Return from the File menu, and then clicking Start a New Return.
2. On the transfer screen, select Continue Without Transferring. Do not transfer information from last year's joint return!
3. Create the "mock" federal return entering the secondary taxpayer's personal information, income, and deductions. For the filing status, choose Married filing separately.
4. Be sure you do not include any deductions already claimed by the primary taxpayer. Only the secondary taxpayer's income and deductions should be entered in this mock return.
5. When finished, run the federal error check (Review > Analysis).
6. Then click State Taxes and complete the secondary taxpayer's state return.
7. When finished, print the state return for your records and paper-file the secondary taxpayer's state MFS return.

Important: Do not file the mock MFS federal return you created here. It was only used to separate the spouse's income and deductions for state tax purposes. However, do not delete the return in case you need to view or amend the spouse's associated state MFS return.

[angelv17]

Was wondering how these instructions may change if have the same situation except the spouses are separated now living in separate states (for 7 months of the year) and they lived (and one spouse still does) in a community property state for the first 5.  Both earning wages in the community property state during those 5 months.

[Cynthiad66]

Your filing process just simplified compared to if you were still filing Married Filing Joint  Since you are separated now the situation is quite different in that you may choose to file your Federal as Married Filing Separately instead of joint.  In some states, this eliminates the need to split income on state returns.  

To fulfill the married filing separately requirements, you'll each report your own income separately. However, if you live in a community property state, you must report half of all community income and all of your separate income on your return.

State requirements are different for each state and would require identifying the states for specific instructions.  Nine states—Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona—have community property statutes that affect a married couple's federal income tax return.

Use this link for additional information:  Tips for Community Property States