Support CenterHow do I report Community Property Income in a SureFire Return? - https://www.irs.gov/pub/irs-prior/f8958--2019.pdfCommunity or Separate Income In a community property state, if you file a federal tax return separately from your spouse, you must report half of all community income and all of your s
Refer to IRS pub 555 and Instructions for form 8958
Taxpayer and Spouse did not live together all yearand met the 4 conditions for filing a MFS return
Four Conditions:
You and your spouse lived apart all year.
You and your spouse didn't file a joint return for a tax year beginning or ending in the calendar year.
You and/or your spouse had earned income for the calendar year that is community income.
You and your spouse haven't transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. Don't take into account transfers satisfying child support obligations or transfers of very small amounts or value.
2. Report all of the taxpayer income on the tax return
3. Complete form 8958 (which is an informational worksheet, amounts will not go the 1040)
a. Override as needed to show community property income for both spouse on the form 8958
Taxpayer and spouse lived together and choose to use MFS for better tax position.
1. If Spouse lived together all year and choose to use the option to MFS combine the community property income for both spouse and split 50%,including taxes override as needed to reflect is TW.
2. If you complete the return as MFJ you can you the Split MFJ return feature
3. Complete form 8958 and override as needed
Reference Example: Pub 504
Example.(p25) - https://taxmap.irs.gov/taxmap2016/pubs/p504-008.htm#TXMP0d2ee7e3
George and Sharon were married throughout the year but didnt live together at any time during the year. Both domiciles were in a community property state. They didnt file a joint return or transfer any of their earned income between themselves. During the year their incomes were as follows:
George Sharon
Wages $20,000 $22,000
Consulting business 5,000
Partnership 10,000
Dividends from separate property 1,000 2,000
Interest from community property 500 500
Totals $26,500 $34,500
Under the community property law of their state, all the income is considered community income. (Some states treat income from separate property as separate incomecheck your state law.) Sharon didnt take part in George's consulting business.
Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). But because they meet the four conditions listed earlier under Spouses living apart all year, they must disregard community property law in reporting all their income (except the interest income) from community property. They each report on their returns only their own earnings and other income, and their share of the interest income from community property. George reports $26,500 and Sharon reports $34,500.
Pub 555 page 3
Community or Separate Property and Income If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. Likewise, a registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. You each must attach your Form 8958 to your return showing how you figured the amount you are reporting on your return. Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes.
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