Regarding married filing separately, do you enter half of the combined total community property wages on the w2 section of the 1040 or only enter your own wages on 1040?

The software does not automatically support the community property reporting requirements for individuals who are married filing separately or who are registered domestic partners and have community property. 

However, you will report half of your income and half of your spouse's income.  You will also report half of any tax withholding for each of you as well.

The IRS says, "If you file separate returns, you and your spouse must each report half of your combined community income and deductions in addition to your separate income and deductions.  Each of you must complete and attach Form 8958 to your Form 1040 showing how you figured the amount you are reporting on your return.  On the appropriate lines of your separate Form 1040, list only your share of the income and deductions on the appropriate lines of your separate tax returns (wages, interest, dividends, etc.).  

Report the credit for federal income tax withheld on community wages in the same manner as your wages. If you and your spouse file separate returns on which each of you reports half the community wages, each of you is entitled to credit for half the income tax withheld on those wages."

The reporting requirements are listed in IRS Publication 555, Community Property.  Click the link below for more information.

https://www.irs.gov/publications/p555#en_US_201502_publink1000168793

"Tax Tip:  When you file separately, you may lose certain credits and deductions.  Figure your tax both on a joint return and on separate returns under the community property laws of your state.  You can then compare the tax figured under both methods and use the one that results in less tax." 

See the TurboTax FAQ below for additional information. 

[Edited 4.9.18 | 9:51 PM]

https://ttlc.intuit.com/replies/3301943

@TurboTaxCaro Thank you for clarifying this confusing topic.  

So, if we include half of my own and half of my spouse's income and tax withholding on the 1040, we should not enter any community property adjustments (additions or subtractions) under "other tax situations" because it would be counter intuitive from already including half of each income and tax withholding on the 1040, right?

On the 8958 worksheet/form, our taxes withheld should reflect the half each spouse is reporting from the combined total, right?

For example, my federal tax withheld is $6,000 and my husband's federal tax withheld is $8,000.  On the 8958 worksheet, it should have the total amount of $14,000 in column A, $7,000 allocated to myself on column B, $7,000 allocated to my spouse on column C.

@jsltwl My apologies for not being more clear.  You will enter your entire amount of the income and tax from your W-2 and everything else, then do the adjustment when completing form 8958.  You will see the income adjustment reflected on Line 21 of your tax return as well as Line 64 for the federal income tax withheld.  You can view your return in Forms Mode to confirm that half of both spouses total community property income and withholding are being reflected on each return.

@TurboTaxCaro Thanks for your help.  Just to clarify, let's use some hypothetical numbers. Wife works at Corp A with wages of $80,000 and tax withholding of $6,000.  Husband works at Corp B with wages of $100,000 and tax withholding of $8,000.

On wife's 1040:
Would it then be Corp A wages of $40,000 and Corp B wages of $50,000 (even though this is husband's employer)?  THEN, on line 7, it would show $90,000 (eventhough wife's employer really didn't report $90,000 but instead $80,000).  Tax withholding would be Corp A - $3,000 and Corp B - $4,000?

On husband's 1040:
Rinse repeat above

On the 8958 form:
Wife:
Show actual withholding total of $14,000 then $7,000 allocated to each spouse OR $6,000 allocated to wife and $8,000 allocated to husband.


Also, if we are already doing the split tango, we do not need to complete the community property income addition/subtraction adjustment in line 21, correct?  If we are already doing this split, there is no longer the need to adjust, correct?  
 
Thanks again for the help!

@jsltwl I think there may have been a misunderstanding.  You each are reporting your own W-2 income and withholding on your own MFS tax returns.  You will enter your W-2 exactly how it appears on your individual returns.  Then you will each complete the 8958 and perform the "split tango" there.  😉  The adjustments will reflect on Lines 21 and 64.

Carol, I am following your logic for a similar issue related to 2019 returns.  I am confused what you mean by lines 21 and 64 for the 2018 return, Looking at Form 1040 line 21 relates to refunds and line 64 does not even exist. Can you clarify?

 This is a new forum layout. Some posts that have June 2019 dates are really older posts from the old forum that got moved over. So they might be for prior years and not current info. When they migrated over the dates got changed to June 2019. And the screen shots got deleted. 

Never mind. I figured it out. Lines 21 and 64 are on the relevant schedules i.e. Schedules 1 through 5.

I have a different question but related to the same Form 8958.  My wife is a non US resident and we lived apart all year. I have figured out there is no allocation of community property nor income. Does the form itself still need to be filed at all or is it filed with no numbers in the boxes?

I have a RDP in a community property state (WA).  I entered the amounts for my 1099-G as 
Ownership Taxpayer, all amounts exactly as printed.  Then I did the split tango on form 8958.  HOWEVER, the full amount shows on Schedule 1 Part1 line 7, not the adjustment I did on 8958.  

On Schedule 1 Part 1 line 7, I right click and try to do a "override" but that option is grayed out and I cannot change the amount.

If I change the 1099-G from Ownership TAXPAYER to JOINT, the amount on Schedule 1 Part 1 line 7 is now 50%, BUT I get an error in TurboTax that "Joint Ownership Box should not be checked. Your filing status is not married filing joint."

ACK!  Is there something else I need to do??? Do I ignore this message and leave the 1099-G as JOINT???

Also, do I enter MY 1099-G into my partner's turbotax return?  Do I mark it as JOINT also? or SPOUSE?

Likewise, for his W-2, do I enter all that into MY turbotax return?  Do I mark it as JOINT? or SPOUSE?

If you are legally married to your partner, then you can file a joint return and combine W2's and 1099 forms.  If not, you will file separate returns and each partner will use their own W2's and 1099's.

The IRS only allows a couple to file a joint tax return if the state they reside in recognizes their relationship as a legal marriage.

 Unmarried couples are never eligible to file joint returns. Even if your wedding is on December 31, the IRS will consider you as being married for that tax year.


@BARRacine

Thank you Mary. Not trying to file a joint return.  We are legal Registered Domestic Partners in a community property state (WA). We are required to file separate returns, but need to split income and withholding 50/50.  I am struggling with how to use TurboTax, how to enter the incomes and make the 1099 to show the 50% on each of our separate returns. 

For the instructions, see How do I prepare our RDP return if we live in California, Nevada, or Washington state?

 When the IRS processes the tax returns, it will run a comparison between the individual 1040s you each file and use the 8958 to determine the tax refund/due for each.

Registered domestic partners should report wages, other income items, and deductions according to the instructions to Form 1040, U.S. Individual Income Tax Return, and related schedules, and Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States. Form 8958 is used to determine the allocation of tax amounts between registered domestic partners. Each partner must complete and attach Form 8958 to his or her Form 1040.

@BARRacine

That is exactly what I am trying to accomplish, but am unable to.

For example, I enter the information of the 1099-G I received into my return. I enter all amounts exactly as are on the 1099-G.  I split the amount between the 2 of us on the 8958.  I go back to my Schedule 1, but it still has the full amount, not the 50% split.  I try to "override" the amount on my schedule 1 so that it is my 50% portion, but the "override" option is grayed out and I cannot do it.

I know I need to enter my partner's W-2 info into his his return and split it 50/50 on 8958... I have not done yet, so I do not know if the software will automatically show 50% on his 1099.  But then how do I get the 50% allocated to me into my return???

@BARRacine  Go back to your original 1099-G entry and Edit to enter the Split amount.  You are correct that the software does not do this for you automatically, unfortunately.  

Entries on Form 8958 do not 'flow' anywhere in the program.

Click this link for more info Splitting Income on Form 8958. 

Ok so I have to split it at 1099-G entry, and the 8958 is just informational to the IRS on how it was split and telling them to go look at the partner's return.

I presume I'll have to manually enter all W-2 and other 1099's this way also!!!    Boo hoo.

But thank you for clearing up.  This general concept has been a real frustration.  Take care.

@jsltwl I am having the same exact issues filing MFS in a community property state (California).  I am still unclear on the response provided by @TurboTaxCarol on how to answer the TurboTax questions.  I also contacted TurboTax support and they were unable to assist.

Matter of fact, my CPA filed my 2018 return using the EXACT method you provided in your example.   We received an IRS CP2000 notice because the IRS was confused how the numbers reported on the 1040 don't match the tax forms.  Examples:

-Wages from Employer W-2 doesn't match 1040 Line 1 (Wages, salaries, tips, etc.)

-Tax Withheld from Employer W-2 doesn't match 1040 Line 16 (Federal income tax withheld from Forms W-2 and 1099)

-1040-INT does not match Line 2b (Taxable Interest)

My CPA responded back to the IRS clarifying the MFS in a community property state rules and all was good.  He advised that the IRS doesn't know how to process these MFS in community property states and every now then, he'll get this notice and have to provide an explanation.  I reported this issue to the IRS Taxpayer Advocate service and they are currently reviewing it.

That being said, did you (or anybody else) figure out how to populate TurboTax?  If not, I'll look into other tax software as I don't find TurboTax intuitive for our situation.  I tried to just edit the forms directly but as one person mentioned some fields are locked so it's not possible.

I split community property w-2 and 1099 income and withholding 50% on each return.  Form 8958 gets populated with those amounts, all under the column for the one you are doing the tax return for, but you must manually add the other 50% into the other column for the other spouse/partner, so that the total column comes up with the real totals. 

For any separate income, like pensions, social security, or anything else separate, you enter the whole amount, but you must show it on the form 8958 with 100% allocation to the one spouse/partner, and 0 tot he other.

In other words, based on what I saw my ex-CPA do, all incomes must be shown on 8958 so that you are disclosing everything.

Also, my ex-CPA used to attach a copy of my domestic partner certificate, so I did that also.

Trying to clarify all answers in this thread... and what I've read... 

So, MFS in community property state... I have a W2 and my wife has a W2... 

IRS says I must "report" half of all community income on my return and my wife must do the same on her return. Which I take to mean this...

-- On my 1040 return I enter my W2 but only 50% of box 1 and 50% of federal withholding

-- I ALSO enter my Wife's W2 on MY return but only 50% as I did for my W2. 

My wife does the same on her 1040 return... entering BOTH my W2 and her W2 (each at 50% of actual box 1 amount). 

Then we each fill out the 8958 and the IRS reconciles the total income between the two 1040 returns. 

Is this correct? 

Not quite. 

You are reading a thread for a Registered Domestic Partnership which is a bit different. They cannot file a Married Filing Separately federal return, but they still need to adjust their income. 

If you are married, you will enter both separate federal returns into each TurboTax program, enter each taxpayer's tax documents into the respective return as they are reported, no need to adjust the tax documents themselves. Next, use the adjustments worksheet.

The adjustment worksheet generates Form 8958 which is included with your tax return.

The program will reallocate the income, deductions, and tax from the adjustment screens which you will use to make the adjustments listed on Form 8958.

This is only necessary when a married couple living in a community property state wishes to file separate returns. 

[Edited 03/17/2021 | 4:26 PM PST]

How to file Separately in a Community property State

@rybird88

Thanks Kris, 

Although if you go back to page one of the thread... it's a "community property" thread that many people have thrown in their particular issues. 

Yes, I understand the basic idea as you explained how it is done. I've read the IRS pubs, etc. I'm required to "report" 50% of my spouse's income and she is to do the same with mine. Also, I've looked through all the TT screens on my 1040. It's confusing and Turbo Tax gives ZERO guidance on exactly what you are supposed to enter.  

My question is specifically how and what do you enter into Turbo tax on each spouse's return in order to "report" it correctly and have TT work it out correctly. 

You say to "enter each tax payers documents". Do you mean enter each payer's documents into ONLY their own 1040? Or both spouse's documents on both 1040's. This is where it is confusing and I've yet to see a clear answer. But this is my question... exactly which documents and on which returns. Hopefully you know the answer. 

This is how I understand what should be done (per what I understand of IRS pub 555)....

For my 1040:

-- I enter my W2 but only 50% of box 1 and 50% of federal withholding

-- I ALSO enter my Wife's W2 on MY return but only 50% as I did for my W2. 

My wife's 1040:

-- She enters her W2 (50% of box 1, etc.)

-- She also enters MY W2 at 50%. 

Same as above for 1099's, etc. 

Then in Turbo Tax "community property" section you manually distribute income and adjust things which will transfer to form 8958 to tell the IRS how ALL the income was allocated.

TT does not "automatically" calculate anything. It will populate W2 income entered and 1099 data, but using TT for community property is confusing because there is no guidance specific to MFS and community property when entering data in the "Income" section. So looking for specific guidance on how TT works and if my outline of how to complete 1040 for this situation is correct according to what the IRS is looking for on a MFS return. 

Thanks for your help!! 

Yes, we welcome all users to add to the thread, just wanted to point it out in case you were not aware. 

No, you each enter your own tax forms on your own tax returns. The IRS program will want to match the numbers to what they have copies of on file. 

In TurboTax you can type   community property worksheet   and then click the "jump to ..."  link in order to make the entries for Form 8958. 

NEXT, you will make the adjustments into the TurboTax program. You can find this section after you wrap up income and before you file the return. When you make these adjustments, the program will adjust the refund and or tax. The tax forms themselves (such as your W-2) will not be altered. 

@rybird88

Okay, the main reason for my confusion is that the IRS states that each spouse must "report" 50% of community income. All "reporting" is done on the 1040. The 8958 is informational only as I understand it. It tells the IRS how you calculated the amounts you "reported" on your 1040.

But what I understand you to say is... when MFS in community property state each spouse fills out their own 1040 basically as if they were single. They enter their own W2's, 1099's, etc. with the exact amounts on those forms. I agree it makes sense that the IRS is wanting to see that the numbers match.

So, each spouse fills out their own 1040 as indicated above and then in Turbo Tax each spouse uses the "community property" section to add W2 and other income from the other spouse, allocate each spouse's income 50/50 in the columns, and make adjustments accordingly which populates to the 8958.

Then Turbo Tax will make an income adjustment to your actual 1040?

This is what I understand you are saying. Is that correct? 

If so, can you tell me... where/how on the 1040 is this adjustment to income (calculated on the 8958) reported? Which line and/or schedule? 

Thanks!

There are 3 steps. 

Enter the tax documents

Enter the adjustments onto the worksheet which populates the 8958 (Informational only, does not generate changes) 

Enter the same adjustments in the allocation screens for each income/tax/deduction.

(you may need to continue through the program to get to this screen or click continue under "Other Tax Situations") This will make the changes on the 1040.

The tax documents will be attached to the return as they are reported, no changes are made to them. 

The numbers on the 1040 are adjusted on each applicable line, not as one single adjustment. 

For example, if you subtract income, it will be a negative number on 1040 line 8 "Other Income" 

Adjustments to tax withholding is on 1040 line 25c. 

Every line on your 1040 that reports an adjustment should have a corresponding number on your spouses 1040.