CPE Article By George Frankel, MBA, J.D., LL.M., CPA
MARRIED FILING
SEPARATELY SPOUSES IN COMMUNITY PROPERTY STATES MUST ALLOCATE COMMUNITY INCOME WHEN FILING SEPARATELY
Married taxpayers generally save taxes by filing jointly rather than separately. However, when married taxpayers are separated or estranged, they should file separately to prevent joint and several liability on a joint return. Curriculum: Tax Level: Intermediate Designed For: Tax Practitioners Objectives: To provide practitioners with an understanding of applying basic community property and separate property rules to married individuals filing separately, and to same-sex married couples. Key Topics: Community property, separate property, same-sex married couples, separate returns Prerequisites: None Advanced Preparation: None
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This article addresses how married spouses (and registered domestic partners, or RDPs, and same-sex married couples in California and Washington) who file separate returns in community property states must allocate items of income and deductions between them. In community property states, married taxpayers combine their separate and community income on a joint return. Married taxpayers filing separately report not only their separate income, but also half of the community income. However, if the requirements of Internal Revenue Code (IRC) Section 66 are met, a spouse reports only his/her income and does not report half of the community income earned by the other spouse. The benefits of Section 66 are not available to an RDP or to California and Washington same-sex married individuals. Married taxpayers who are not divorced or legally separated generally save taxes by filing jointly, but estranged spouses should file separately. A married taxpayer who is not legally separated under a decree of divorce or separate maintenance can file either a joint return or separate return whether living together or apart.1 Today’sCPA
| JULY/AUGUST 2013