PA Return Taxpayer Resident Spouse Non-Resident

[jonbellcpa64]

I am trying to show PA income to the Taxpayer only. Presently I have the return set up as a full-year resident in screen 1. Then for the spouse, I have indicated they are a resident in their respective state. The issue is that PA return is pulling the non-resident Spouse's Sch C income into the PA return as taxable to PA.  Any thoughts on how I should address this issue?

[itonewbie]

You can't.  If your PA resident client and the NR spouse elect to file the PA return jointly, the NR spouse would be treated as a tax resident for the same period.  You are supposed to be able to file MFS for PA but Lacerte/PTO does not seem to provide a different filing status for PA (although it does for some other states).  This article seems to imply that there is a way but the link is, unfortunately, not working: https://proconnect.intuit.com/community/individual/help/individual-pennsylvania-miscellaneous-inform...

@IntuitAustin @IntuitBettyJo Could you please update the link of this article?  Thanks!

[IntuitBettyJo]

Hi there, 

It doesn't look like we have an updated link, however I was able to find this information regarding PA Informational Diagnostic Ref. 5185 and added it below.  Hope it helps! I also put through a request to our content team in order to have the article updated accordingly.  - Betty Jo 

PA Informational Diagnostic Ref. 5185 The Filing Status for Pennsylvania Return

This diagnostic generates when the Pennsylvania return is Married Filing Separate:

e-file: The filing status for the Pennsylvania return is Married Filing Separate. The Lacerte program will create an electronic file with only the taxpayer's information. The spouse's information will not be included. The spouse's return must be filed as a conventional paper return. (ref. 5185)

Per the PA-40 instructions all 5 of the following conditions must be met for MFJ return to be filed jointly. Otherwise, the return must be filed MFS.

(J) Married, Filing Jointly

You and your spouse, even if living apart, can file a joint return for convenience. To file jointly, you must meet ALL of the following conditions:

1. Your taxable years end on the same date; and

2. You and your spouse elect to have the same residency period (earliest starting date if you moved into PA and latest ending date if you moved out of PA) if you are part-year residents; and

3. Neither of you is individually claiming one or more of the credits on PA Schedule OC, (see page 22); and

4. Your spouse is still living; and

5. Neither of you is individually liable for the payment of child or spousal support, or another liability to the PA Department of Public Welfare.

Solution:

When any of the 5 conditions listed are not met, the Lacerte program automatically creates a MFS return to comply with the PA-40 instructions.  The Lacerte program can only create one e-file document transmission per return, which results in one of the filers returns having to be paper filed.  A MFS status requires two separate e-file transmissions which can not be done within the same return. Therefore, a paper return will be necessary for the spouse's return.

[itonewbie]

@IntuitBettyJo Thanks, BettyJo, but there's no conceivable way to indicate in Lacerte/PTO whether these conditions are met though.  Lacerte/PTO seem to follow what's chosen for federal by default, from what I can tell.  Could you please shed some light on this?

[jonbellcpa64]

I was unable to change the filing status to MFS using the solution you provided.  However, my solution, for now is to create a MFS split of the return and then simply file the MFS return for the taxpayer in PA once the return has been split. 

[itonewbie]

But that would also mean that the PA return will need to be filed on paper...  Not the best solution but it is what it is, I guess... at least until Intuit comes back with an update.

[jonbellcpa64]

I check the box to efile the PA return and it did not generate a critical diagnostic so I thought I would be good to e-file. 

[itonewbie]

PA is not a standalone but piggyback/state only return, which means that the MFS federal return must have been e-filed already or together with the PA return.  Are you sure you e-filed only the state without federal (which you presumably would file MFJ)?