Form 8958: Is Spouse's Separate Income Required on this Form?

[BFWP33]

Hello - When filling out Form 8958 in Turbotax, is it required to provide the details of all of my spouse's _separate income_? Full example below.

Details: Married Filing Separately; married in 2019, at the end of the year.

For illustrative purposes, assume:

Spouse A

Job1: Separate Income of $90

Job2: Community Income of $10

Spouse B

Job3: Separate Income of $270

Job4: Community Income of $30

On Spouse A's Form 8958, I would list:

-Job1: Total Income $90, fully allocated to spouse A

-Job2: Total Income of $10, with $5 allocated to Spouse A, and $5 allocated to Spouse B

-Job4: Total Income of $30, with $15 allocated to Spouse A, and $15 allocated to Spouse B

On Spouse B's Form 8958, I would list:

-Job2: Total Income of $10, with $5 allocated to Spouse A, and $5 allocated to Spouse B

-Job3: Total Income of $270, fully allocated to Spouse B

-Job4: Total Income of $30, with $15 allocated to Spouse A, and $15 allocated to Spouse B

My specific question is: 

1.) Does Job1 need to be listed on Spouse B's Form 8958? It is entirely separate income, so I strongly assume it is not required.

2.) Does Job 3 need to be listed on Spouse A's Form 8958? It is entirely separate income, so I strongly assume it is not required.

Thanks in advance for your responses.

[macuser_22]

In most cased community income is ALL income earned from employment when married.    Income from investments prior to marriage in one spouses name is usually separate income. 

See IRS Pub 555:

https://www.irs.gov/pub/irs-pdf/p555.pdf

[BFWP33]

Thanks for the reply, Macuser_22. I appreciate your comment.

We were married in December, so the majority of our 2019 income was received prior to being married. I am confident that I have properly identified what is Community Income, and what is Separate Income.

My question is more focused on what actually needs to be recorded on each Spouse's Form 8958. For example, in my illustration, does Spouse A's Form 8958 need to have a line item showing Job3, with zero dollars from Job3 allocated to Spouse A? I would think the answer is no, since the income from Job3 is entirely Separate Income of Spouse B. My assumption is based on the statement below, which makes no mention of reporting the Spouse's separate income as a line item on Form 8958:

From Form 8958's instructions: "In a community property state, if you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income."

[macuser_22]

I can only refer you to the 8958 instructions that you already have.

Have you considered just filing a joint return?    Usually you will pay a lower tax filing joint.   You can create a dummy account and try it both ways.

If you file MFS (Married Filing Separately) keep in mind that there are several limitations to MFS.  Married filing Jointly is usually the better way to file.
 
A few of those limitations are: (see IRS Pub 17 for the full list

https://www.irs.gov/pub/irs-pdf/p17.pdf page 21

1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. For more information about these expenses, the credit, and the exclusion, see chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the American opportunity credit and lifetime learning credit) or the deduction for student loan interest.
7. You cannot exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled, and
b. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

- If you live in a community property state you must allocate community income between both spouses..
-
- Community property states.   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555. http://www.irs.gov/publications/p555/index.html

 
See this TurboTax article for help with this.
https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

[Anonymous]

you can look at the form - link below -  to see the detail you must provide. the instructions are attached

https://www.irs.gov/pub/irs-pdf/f8958.pdf

[BFWP33]

Thanks, Hackitoff. I did read the link you provided, but it does not explicitly address whether or not you have to include your Spouse's Separate Income as a line item.

Curious if anyone has had experience with this.

[nwa123]

Did you ever figure this out? I have the exact same question and also haven't gotten a clear answer.

[macuser_22]

Follow the IRS instructions for the form.

https://www.irs.gov/pub/irs-pdf/f8958.pdf

[BFWP33]

Hi Nwa123 -

I'm the original poster, and I remember researching this extensively last year. My specific question was never directly addressed anywhere; moreover, I'm not confident that you'd get consistent answers if you asked different experts. I can say that I did include Job1 on Spouse B's Form 8958, and I did include Job 3 on Spouse A's Form 8958 (referring to the example in my original post).

From memory, I don't think the inclusion of these line items on Form 8958 impacted any calculations; in other words, I don't think there's any harm in over-documenting this. That being said, I'm certainly not a tax expert -- just an educated Joe who has successfully filed his tax return for several years in a row... 🙂

Good Luck.

[macuser_22]

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@BFWP33 wrote:

Hi Nwa123 -

I'm the original poster, and I remember researching this extensively last year. My specific question was never directly addressed anywhere; moreover, I'm not confident that you'd get consistent answers if you asked different experts. I can say that I did include Job1 on Spouse B's Form 8958, and I did include Job 3 on Spouse A's Form 8958 (referring to the example in my original post).

From memory, I don't think the inclusion of these line items on Form 8958 impacted any calculations; in other words, I don't think there's any harm in over-documenting this. That being said, I'm certainly not a tax expert -- just an educated Joe who has successfully filed his tax return for several years in a row... 🙂

Good Luck.

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One reason that this is difficult question to answer is because the IRS defers to state law on community property and that is different is different states.  

Then if there are special circumstances (separated spouses, spouses living in different states, divorce involved, etc) it can get very complicated and require legal help from a tax professional that knows the laws of the states involved, or even if it can be disregarded altogether.