HOW TO FILE MONTANA MFS WITH SPOUSE NOT FILING?

[IntuitAlicia]

This can be indicated in Screen 3, Miscellaneous Info / Direct Deposit, by checking the 'Married filing separate and spouse not filing' checkbox. This is located in the 'Montana Miscellaneous' section.

[IntuitAlicia]

When you check this box, it will mark Filing Status 2c on the return.

[Nathan02]

This works for getting the box checked, but Lacerte is not splitting the income or deductions. Taxpayer lives and works in MT, spouse lives and works in another state. Lacerte is showing all income and deductions in the taxpayer column (both taxpayer and spouse income and deductions in total). Some should be split and some should be taxpayer specific. For Federal purposes they are filing a joint return.

[qbteachmt]

"Taxpayer lives and works in MT, spouse lives and works in another state."

Then you don't want 2c. You want 2b, because the spouse is filing NR.

[Nathan02]

Thanks, but the spouse has no MT source income. The instructions say, "You and your spouse must use filing Status 2b if one spouse is a resident of Montana and the other spouse is a nonresident who has Montana source income."

2c is the appropriate filing status. You can use filing Status 2c when "You are a resident and your spouse is a nonresident who has no Montana source income".

I tried 2b anyways, and same results, all the income and deductions were in the taxpayer column. All my inputs only have MT on the MT source income.

Maybe it's a Lacerte issue since the other state is WA and has no income tax and thus just has the US designation. I can't figure out how to make just the spouse a nonresident.

[qbteachmt]

MT will tax Joint income, split. You allocate income by name if the income is sourced by name; otherwise, it is all considered Joint, such as Joint Investments.

For Expense, paid from Joint accounts, you can arbitrarily split that expense. For example, property tax payments can be split however you like.

And MT taxes out of state income, such as winning the CA lottery and moving to MT means that is taxable in MT.

[Nathan02]

Even straight married filing separately it's wanting to tax all of the nonresident spouse's income, even wages of the nonresident spouse. The spouse does not live in or work in MT. Only the taxpayer works in MT and travels occasionally to WA to visit the spouse.

[qbteachmt]

MT taxes most things, and then gives credit back when it involves other States. You will need to go to the source:

https://mtrevenue.gov/

[Nathan02]

Thanks, actually nonresident spouse's income doesn't even get reported when spouse has no MT source income. I'll try contacting Lacerte again for the real fix.

[208Accountant]

Did you ever find a solution for this. I am dealing with the EXACT scenario. 

[Nathan02]

I haven't contacted Lacerte, yet, to get their suggestion. I'm hoping to have time next week.

Pressing F1 on the "Married filing separate and spouse not filing" input checkbox gives this note:

"This checkbox does not automatically exclude the spouse's income. The federal return must be set as Married Filing Jointly with the spouse income already excluded."

My backup plan if I don't get advice from Lacerte is to copy the client and remove the spouse's income and split the rest so MT shows just the taxpayer's earnings and half the investment income and itemized deductions. Then use the first client file to e-file just the US return and the second to e-file just the MT return.

[208Accountant]

That is exactly what I resorted to today. I spent almost two hours on the phone with Lacerte. They could not offer a solution so they escalated it to their software developers. 

Thanks for taking the time to respond. Lacerte is supposed to call me back with a resolution so I will update you if I learn anything new. 

[Nathan02]

Excellent. I'll let you know if I get a different response from Lacerte. Probably not, but you never know!