Pension as community income

[Kearnyguy]

How do I tell the program a pension is community income and ask the program to split the amount when separate returns are generated. The program will split wages reported on a W-2 but will not split a pension reported on Form 1099-R.

[Jack4 · Accepted solution]

Hi, Kearnyguy. We have an article on this issue. I will paste it below. Lacerte will not split pension income on the MFJ/MFS income worksheet for community property states. It will keep the designation either taxpayer or spouse. To split it, a manual entry will be required to show the split by entering two items (one for the taxpayer and one for the spouse).

MFJ/MFS Worksheet doesn't split the retirement distributions on a community property return between the taxpayer and spouse.

Solution

When Community Property options are set to:

• No - The program will allocate all items according to the 'taxpayer' and 'spouse' designators.
• Yes - The program will net all wages and business income or loss and allocate 50% to each spouse on the MFJ/MFS worksheet. The program allocates all other income and deductions (including pensions) according to the 'taxpayer' and 'spouse' designators.

Because the program does not split these items automatically, adjustments must be manually entered in the TP/SP split returns, after the split is complete.

Follow these steps to override the Community Property Designation:

1. Go to Screen 3, Miscellaneous Info./Direct Deposit.
2. In the lower portion of the Miscellaneous section, locate Apply community property rules: 1=no, 2=yes.

This will override the selection set in your program Options, on a client-by-client basis.