Divorced in 2021. How do I allocate ex spouses income on return?

[Wisconsin2495]

Divorce was final in November 2021. Divorce decree states that I must include 50% of ex spouse's income (and taxes withheld) on my return. I live in Wisconsin, a community property state. How do I do this? Where is this information entered? 

[VolvoGirl]

If you were divorced in 2020 you file 2020 and 2021 as Single or Head of Household if you have a qualifying dependent.   So you don't need to include your ex income.   Or do you get half of their retirement like a QDRO or military retirement?

[Wisconsin2495]

Argghh! I typed the wrong year. Divorce final in 2021. I corrected it 🙂

[DMarkM1 · Accepted solution]

You will need to mail in the return for 2021 due to the unusual circumstance of having to file single, but including an ex-spouse income/withholding.  

You will enter the income that belongs to you according to the laws of WI as if earned by you.  For example, if your W2 has a box 1 amount of 10,000 that is all yours but you must include 50% of your ex-spouse's W2 income, you would enter you spouse's W2 with your social security number and change the box 1 amount in those W2 entries to what it is legally supposed to be for you.  You would do the same for box 2 (withholding) and box 16 and box 17 (state boxes).  Leave the other boxes for her W2 blank. 

If part of your W2 belongs to your spouse change the box 1, 2, 16 and 17 as needed.  

You use the same method (enter as if you earned it) for any income source or deduction from your ex-spouse.

Next you will need to complete a form 8958 to show the allocations on your return.  If you are using a TurboTax desktop product you can use the "Forms View" and search for the "8958."  You can type into the form.  Check the box indicating you have allocated on your return.  Complete the columns for each item that was altered/allocated in your return.  

You can print the form separately for mailing in with your other completed tax forms for mailing. The form will not normally print as part of a return that is not Married Filing Separate. You might also include a copy of the page of your divorce decree that directs the allocation. 

If you are using an online product, download/complete the form from the IRS site and print it to include with your other completed tax forms for mailing. You might also include a copy of the page of your divorce decree that directs the allocation.

Be sure to keep records of how you allocated each item.

Edited [3/14/2022 9:54 PDT] 

[Wisconsin2495]

Thank you very much! 

[Wisconsin2495]

@DMarkM1 

For clarification: we have to split each other's income 50%. So, using your example of my W2 showing 10,000, and let's say my ex-spouse's W2 shows $5000. I would change box 1, 2, 16, 17 to show 7,500, right? Because half of my income goes on my ex-spouse's tax return, that means I only claim half of my own ... is this correct? Half of mine = 5,000 plus 50% of my ex-spouse = 2,500 for a total of 7,500. Can you confirm if I understand this correctly?

[DianeW777]

There is somewhat of a caveat according to the WI Publication 109.  This publication specifically lays out what is required on the WI return in the year of divorce. Any income earned after the divorce belongs only to the person who earned it. This means you don't just take the W2 total but figure out the amounts up until the divorce.  

Divorced spouses

An absolute decree of divorce ends the marital community. When the marital community is ended, the marital property assets are divided between the spouses. Any income earned after the marriage ends is taxable only to the spouse to whom it belongs. However, each spouse is generally taxed on half of the marital property income for the part of the year before the marital community ends. You can't use a marital property agreement to reclassify income earned prior to the agreement for income tax purposes. Nor can a court order retroactively reclassify income for income tax purposes.

Please update if you need additional assistance.

[Wisconsin2495]

@DianeW777 

Thank you for the clarification. I can calculate that amount. 

2 questions:

1) Do I use the same amounts calculated for Wisconsin on the federal return? Or is the federal done at the 50% mark?

2) My earlier question on the splitting of income W2 entry: taking the particulars of WI out of the equation for the moment, am I correct in thinking that since we each have to include 50% of the other's income, I include only half of my income (as opposed to ALL of my income) when adjusting my box 1 W2 entry? 

[DMarkM1]

Yes, you will use the same allocation for both returns according to the state laws.  Yes, you will adjust the amounts in your boxes 1, 2, 16 and 17 to show what the laws of WI direct as well. 

@Wisconsin2495