Married Filing Separately in a Community Property State

[KCameron]

I have never filed a Married Filing Separately Tax return where the taxpayers have chosen to split their income. I have that situation this year. I completed the 8958 and expected it to split the income for me, but it didn't. Do I change the W2, etc information on the worksheets? I'm completely lost. Any help would be greatly appreciated.

[jeffmcpa2010]

I am not sure all community property states are the same. I am in Washington and Income is (state constitutionally as interpreted by the courts) considered property, so in order to do a MFS return, He reports half of His Income and withholding, and Half of her income and withholding. Basically both returns income/deduction wise should be identical. Unless there is separate property, (which can only happen in Washington by being very intentional and diligent), which is income producing.

Not sure if it helps, but that is what I know from Washington.

[KCameron]

Thanks. That makes sense. If you have done this before, do you just change the information in the W2 worksheet. I'm so used to making sure the W2 worksheet matches the W2, it makes me a little anxious. But then again, I stay anxious this time of year. 

[jeffmcpa2010]

I haven't done it in (Washington) for so long I really don't know how I would approach entering the data. I basically tell them that it is not going to save any tax and it's going to double the accounting fee (because I'd be doing two returns) and keep talking until I either talk them out of it, or they go somewhere else.

If there is a non tax reason they want to do it (ie trust issues) I just don't want to be involved in that anyway. 

[sewcpa · Accepted solution]

After following jeffmcpa 's steps then using a multi-column spreadsheet make your own chart of the income and w/h items in his and her and one/half columns. The totals of these columns will need to match finished return. Attach this spreadsheet as a pdf to return.

Enter w-2 etc for your taxpayer. Use the Other income line to increase or decrease income to match. The w/h total may have to be input at the lesser amount on a W-2 because a negative w/h does not work. It is a royal pain if they have to MFS. Good Luck.

[KCameron]

I hear you. I may take that approach. Thank you.

[KCameron]

Perfect. Thank you.