Preparing returns in Lacerte for married individuals living in different states

Lacerte supports returns for Married Taxpayers who live in different states. However, whether the taxpayers can file a MFJ or MFS return depends on the state.

Most states have guidelines on how to handle this situation. Some states only accept MFS returns. Other states recommend filing a nonresident return if you file as MFJ. And some states only accept a full-year resident return if you file MFJ. How you will need to prepare the returns in Lacerte will depend on the instructions provided by the state.

Note: It may be necessary to complete two separate joint returns if both states indicate full year resident returns are required for MFJ filing status.

Example #1:

Arizona form instructions say to file a Nonresident Return if filing MFJ:

A Taxpayer is a full year resident of AZ and their Spouse is a full year resident of CA. Per the AZ instructions (below) if they file a joint return then they must file AZ Form 140NR.

"...If filing a joint return with your nonresident spouse, you must file a joint return using Form 140NR... If filing a joint return with your part-year resident spouse, you must file a joint return using Form 140PY..."

To generate the AZ 140NR for this scenario:

1. Go to Screen 1, Client Information.
2. Uncheck the box Full Year Resident.

Example #2:

New York form instructions say to file MFS Resident and Nonresident returns if required or if the Taxpayer and Spouse choose file a Joint Full-year resident return:

"...If you are married and filing a joint federal income tax return but one spouse is a New York state resident and the other is a nonresident or part-year resident, you are required to file separate New York state returns. The resident must use Form IT-201... The nonresident or part-year resident, if required to file a New York State return, must use Form IT-203. However, if you both choose to file a joint New York State return, use Form IT-201 and both spouses' income will be taxes as full-year residents of New York State.

If the Taxpayer and Spouse file separately, each of them will need to complete a separate return. To do this for NY purposes, you can use the Split Joint Return tool or manually create the separate return. However, if the Spouse did not earn any income in NY and is not obligated to file NY form IT-203, only the Taxpayer's separate return will be necessary.