How do I prepare a joint federal return and separate state returns?

by TurboTax•168• Updated 1 week ago

Caution: Each state has its own rules regarding this topic. For example, Arizona allows couples to file separately even if they filed a joint federal return, whereas Colorado does not. California doesn't allow it either, with the exception of active-duty military and certain nonresidents. Before proceeding further, make sure this is allowed by your state's tax laws.

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

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

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

Prepare one married filing jointly (MFJ) return to file with the IRS.
Prepare a mock married filing separate (MFS) 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.
Then, for the first taxpayer, label and use the first mock MFS federal return to prepare their state MFS return. Use 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, not the mock federal return that it pulls the information from.
For the second taxpayer (spouse), label and use the second "mock" MFS federal return to prepare their state MFS return. Again, use only their income and their half of the deductions from the MFJ federal return.
File the second MFS state return, 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 (learn more).

For detailed instructions, see the related section below for the taxpayer who needs 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 Desktop version:

Open your completed Married Filing Jointly (MFJ) return (the real return you'll file with the IRS).
Then save the return with a new file name, for the primary taxpayer. 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 your 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.
From the Personal Info tab, select You & Your Family.
Scroll down to Your Filing Status and select Edit.
On the Review Your Filing Status screen, check Change my filing status and select Married filing separately, then select Continue.
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).
- Remove all deductions that apply to the secondary taxpayer (e.g., medical or educational deductions) as well. You'll also need to determine how to split any joint deductions, so be careful not to miss any or use any deductions twice.
Now run the federal error check (Review Analysis). When finished, you have the primary taxpayer's mock return.
Select State Taxes (this pulls the state data from this mock return) and complete the primary taxpayer's state return.
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, because you may need it in order 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 in 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.

In TurboTax Desktop, start a new return by choosing New Tax Return from the File menu, and then selecting Start a New Return.
On the transfer screen, select Continue Without Transferring. Do not transfer information from last year's joint return!
Create the mock federal return by entering the secondary taxpayer's personal information, income, and deductions. For the filing status, choose Married filing separately.
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.
When finished, run the federal error check (Review Analysis).
Then select State Taxes and complete the secondary taxpayer's state return.
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, because you may need it in order to view or amend the spouse's associated state MFS return.