Discussion:CALIF COMMUNITY INCOME AND DEDUCTIONS-MARRIED FILLING SEPARATELY
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Discussion Forum Index --> Tax Questions --> CALIF COMMUNITY INCOME AND DEDUCTIONS-MARRIED FILLING SEPARATELY
TAXMAN61943 (talk|edits) said: | 9 April 2007 |
| TAXPAYER MARRIES SPOUSE WITH LARGE PREVIOUS TO MARRIAGE TAX LIABLITY. SPOUSE IS DISABLED WITH NO INCOME OR ASSETS AND THE TAXPAYER IS THEIR SOLE SUPPORT. TAXPAYER OWNED RESIDENCE (SEPARATE PROPERTY) PRIOR TO MARRIAGE WITH MORTGAGE. I UNDERSTAND THAT WAGES AND WITHHOLDING HAVE TO ALLOCATED 50% EACH AND MEDICAL EXPENSES BY WHOM SERVICES WERE RENDERRED TO BUT WHAT ABOUT MORTGAGE INTEREST AND PROPERTY TAXES AND TAXPAYER'S FORM 2106 EXPENSES? | |
| 9 April 2007 | |
| Deductions that benefit the community and are paid out of community property funds must be split 50-50.
In this case, the spouse is acquiring a community property interest in a separate property asset. Thus, he or she has an equitable interest in the home and should have no problem in deducting his or her half of the mortgage interest and taxes. I realize that it would be better to deduct it on the taxpayer's return, but this would not be correct. My answer would change if they have a separate property agreement. Medical expenses and employee business expenses should also be split 50-50 unless the bills were paid out of pre-marital or separate property funds. | |
| 9 April 2007 | |
| Am I missing something - what about filing either an injured spouse form or innocent spouse form? | |
Michaelstar (talk|edits) said: | 9 April 2007 |
| In a case such as this - unless it is unavoidable, the payments to the property s/b made from separate property funds to be able to maintain that property as separate property. If that was done, then as Riley2 states - the mortgage interest and r/e taxes could be claimed on the t/p's separate t/r and not split 50/50 (implied).
Even though the o/s tax liabilities are prior to the current marriage, once the t/p's file a joint t/r - any overpayment will be utilized to relinquish any prior (tax)debt. In such a situation, I might suggest that there never be an overpayment on a t/r as filed unless the t/p's decide themselves to relinguish the "other" debt via this method. Also remember, that once funds are comingled and the spouse that owes the debt becomes a joint owner of ANY accounts - those accounts are fair game to be utilized by the IRS to be liened upon. Amazing what one learns when there is at least one client per year entering into a divorce, large estates and living in the sunny state of CA. Riley2 - if there is anything you see here as incorrect - please point it out for the benefit of the population. | |
| 9 April 2007 | |
| Jokadah, injured spouse claims don't work in California because the CA Family code makes the entire community estate liable for the past tax debt. The Service issued a series of Revenue Rulings a couple of years ago identifying those community property states where it would be a waste of time to prepare the injured spouse claim. California was on the the top of the list. | |
| 9 April 2007 | |
| Also, innocent spouse relief under 66(c) applies only to overstatements of deductions or understatements of income of which the innocent spouse had neither actual or constructive knowledge. Don't see any relief from Sec. 66(c). | |
TAXMAN61943 (talk|edits) said: | 9 April 2007 |
| ALL FUNDS ARE DEPOSITED IN A CHECKING ACCOUNT WITH THE TAXPAYERS NAME ONLY. IS IT POSSIBLE TO TREAT PROPERTY TAXES AND MORTGAGE INTEREST AS BEING PAID 100% FROM THE TAXPAYERS INTEREST IN THAT ACCOUNT? | |
| 9 April 2007 | |
| I have several clients I use injured spouse on in CA. The IRS allows the injured spouse claim, however, it takes 12-15 weeks after electronic filing for the "Injured Spouse" to get her refund (including interest from IRS). | |
Michaelstar (talk|edits) said: | 9 April 2007 |
| Not if (as Riley2 stated above) the funds deposited into that account are community property funds. For example - wages earned during marriage are community property funds. | |
| 10 April 2007 | |
| EA-Taxgal, the IRS processes injured spouse claims in California fairly regularly. However, more often than not, the Service will simply reject the claim and cite Revenue Ruling 2004-72 as their justification for doing so. Not trying to be insulting, but how many Internal Revenue Service employees have actually read Revenue Ruling 2004-72? In fact, how many Internal Revenue Service employees understand how California community property laws differ from community property laws in other jurisdictions? My recommendation is to file the 8379 injured spouse claim if there is no way to file a separate return, but remember to advise the client that there is a chance that the Service Center employee processing the claim may have actually read Revenue Ruling 2004-72. | |
| 10 April 2007 | |
| I wonder if Taxman's clients have a prenuptial or postnuptial agreement about what belongs to whom. Such agreements are generally effective under California law for tax purposes. It sounds as though in this case, if they didn't have a prenup, they should have! | |
