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Common questions about entering Form 8958 income for community property allocation in ProConnect Tax

by Intuit• Updated 4 months ago

Income allocation information is required when electronically filing a return with a Married Filing Separately or Registered Domestic Partner status in the Individual module of ProConnect. Refer to the information below to assist with questions regarding Community Property Income Allocation.

ProConnect doesn't automatically split retirement distributions. Because of this, you'll need to manually enter adjustments in the taxpayer/spouse split returns, after the split is complete.

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.

Follow these steps to override the community property designation:

  1. From the Input Return tab, go to General ⮕ Miscellaneous Information/Direct Deposit.
  2. Select the Miscellaneous tab at the top of the input screen.
  3. Scroll down to Apply community property rules: 1=no, 2=yes.

Unemployment Compensation Exclusion was not extended further, meaning it only applies to tax year 2020.

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

Form 8958: Enter income allocation information - Ref. 6403

The following critical diagnostic is generating:

Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States: Enter Income Allocation information in the e-file MFS Income Allocation screen. Ref #6403

This diagnostic is triggered for Married Filing Separately (MFS) returns with residence in a community property state. Click on the situation that applies to your return, below, to view steps to clear the diagnostic.

  1. Go to the Input Return tab.
  2. On the left-side menu, select General.
  3. Click on Community Property Income Allocation.
  4. Remove all entries in this screen.
  1. Go to the Input Return tab.
  2. On the left-side menu, select General.
  3. Click on Community Property Income Allocation.
  4. Click the plus sign (+) to expand each field and enter the Taxpayer and Spouse amounts.

If you're receiving this diagnostic but believe that your client is not subject to community property rules:

  1. Go to the Input Return tab.
  2. On the left-side menu, select General.
  3. Click on Misc. Info./Direct Deposit.
  4. Scroll down until you see the HOH Spouse Exemption subsection.
  5. Below that subsection, enter a 1 in Apply community property rules: 1=no, 2=yes.

Note: This may result in an e-file rejection if Form 8958 is required.

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