KC This is for you, or any CA preparer

[Terry D EA]

I have a client who has moved to CA three years ago. They were married and are in the process of filing for a divorce. They have been living separate from each other and are under a separation agreement with the divorce hearing scheduled for Feb 2. Now, the girl (my client and daughter) wants to file MFS. She has been told she cannot e-file the tax return due to her filing status of MFS. I have looked and looked for some IRS reg that addresses this issue and cannot find any. Currently looking into CA State law. Have you or anyone heard of this and can you give me some direction. I have been reading Pub 555 on community income and expenses to help her in that area but am coming up short on the e-file thing.

[Terry D EA]

Sorry I did not mean to leave others out and not get an objective set of opinions. Anyone who has experience with community property states especially CA can answer please.

[Tax Prep by Deb]

She can file Married filing separate.  To efile there is a special allocation form that has to be included in the return.  The allocation form is 8958. 

[kcjenkins]

Deb is right, Terry.  No one is ever required to file a joint return, if either one does file MFS, the other must too.  Each is supposed to inform the other.  And then each files the 8958.

On the return  each spouse should report his/her own income on line 7 (for wages) and 8a (for interest), and any other lines as appropriate, then make an adjustment on line 21 to divide income equally between spouses. On line 21 she could have a positive community property adjustment  for half of his income and a negative community property adjustment for subtracting half of her own income.

 

[Terry D EA]

Thank you both. I found out what she was trying to do. She was trying to e-file using a free e-file online program that would not let her file because she is using more forms than just the 1040EZ. Deb I did know about the 8958 form and have to be sure she meets all of the exceptions to including her soon to be ex's income. Everything I have read so far indicates she does. We are being really careful here. We filed for equitable relief for a tax bill her ex owes and she was told we would hear something this month but we all know how the IRS is. She shows a refund and I don't know if the IRS will hold the return and the refund until they make decision. I know what will happen if they have ruled against her. With all the circumstances that led up to this, I don't see how they would hold her liable. But... we'll see.

[kcjenkins]

Good thing, really, so she had to ask you.  This way she does not mess herself up just because she's in a hurry.  We see that so often.

[BulldogTom]

Terry,

There is a quirk in the CA Community Property Laws that you need to know about when splitting income.  The community ends on the day the couple split with no intention of reconciling.  It is a facts and circumstances test.  So, if they split in May, you would only have 5 months of community income, regardless of when the divorce is final. 

Tom
Newark, CA

[Terry D EA]

Thanks Tom for this information. Can you give me a resource on the CA Department of Taxation website or resource on the community property laws. I may need this to give to her for legal reasons as her soon to be Ex questions everything. Thanks again for your input,

[Terry D EA]

3 hours ago, kcjenkins said:

Good thing, really, so she had to ask you.  This way she does not mess herself up just because she's in a hurry.  We see that so often.

KC,

I am glad she did too cause it looks like she may have messed up on the community income. I will admit I am very weak in this area but will research and study. Of course, and it goes without saying, I have all of the folks on this board as well. That is a value that you can't put a price on. Thanks again

[BulldogTom]

Terry, I did the research on this several years ago when I had a client going through a nasty divorce.  Never forgot the concept.  Here is a quick quote from a google search on the subject. 

"California uses the date of separation as the essential date for determining property interests; property acquired by a spouse after the date of separation is considered to be that spouse’s separate property, while property acquired before the date of separation is community property"

Tom
Newark, CA

[Terry D EA]

Thanks Tom, I'll keep looking.

[joanmcq]

I'm well versed in this because of my same sex couples.  RDPs still have to allocate community property. Pub 555 is a place to start. Also www.ftb.ca.gov