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?

[jsltwl]

I am married filing separately and live in a community property state with my spouse.

Under the 1040 section of the W2, do I enter half of the combined wages between my spouse or only enter my own wages and report the community property adjustments in the 8958 form/community property worksheet?

If combine and divide method, do I combine every item from both w2s (boxes 1- boxes 17)?  If I combine, do I still need to enter anything in the community property income adjustments?

I am tilting towards the enter our own w2 in our own separate tax return and then the form 8958 will show the adjustments.

For example my wage is $60,000 and husband is $80,000.  I enter $60,000 in my own 1040 and then the community property income addition adjustment is $10,000 on the 8958 form.

His tax return will have $80,000 on his own 1040 and then the community property income subtraction adjustment is $10,000 on the 8958 form.

[CarolC]

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

[jsltwl]

@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.

[CarolC]

@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.

[jsltwl]

@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!

[CarolC]

@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.

[BridgeHall555]

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?

[VolvoGirl]

 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. 

[BridgeHall555]

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?

[BARRacine]

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???

[BARRacine]

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?

[MaryM428]

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

[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. 

[MaryK4]

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

[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???