Discussion:New Form 8958 for “MFS”

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Discussion Forum Index --> Advanced Tax Questions --> New Form 8958 for “MFS”


Discussion Forum Index --> Tax Questions --> New Form 8958 for “MFS”

Taxcpa (talk|edits) said:

4 February 2013
Is this form mandatory?

In Community state, do we have to list all community income? If the client is willing to help us to get all info, then they will file “MFJ”.

Joanmcq (talk|edits) said:

5 February 2013
I have this form for my same sex couples, and the answer is 'not sure' to both. That's from the Practitioner liason here in CA.

Nightsnorkeler (talk|edits) said:

5 February 2013
Not authoritative source, but....

IRS Announces Form 8958

IRS Announces Form 8958

July 6, 2012 – 3:12 pm 

The IRS has announced the creation of Form 8958, Allocation of Tax Amounts Between Married Filing Separate Spouses, Same-Sex Spouses, or Registered Domestic Partners with Community Property Rights. The form will be available for use by individuals required to allocate income in community property states beginning in 2013 and can be used to file federal returns by individuals residing in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Kathyt (talk|edits) said:

5 February 2013
To me this form is the same thing as the MFS Income allocation worksheet that was mandatory with efile in prior years. At least in Lacerte it was mandatory. For anyone who uses Lacerte: I did one yesterday and I kept getting an error message saying that I needed to complete the form, but the form was completed, so I asked Lacerte and they said it's a error they are trying to work out, to turn off e-file critical diagnostics for that return then file it. Also note to Lacerte users, for the first time instead of calling Lacerte when I had a problem I used the chat instead, MUCH FASTER way to resolve issues, I had someone to chat with in a matter of seconds and within 3 minutes the matter was resolved.

Nightsnorkeler (talk|edits) said:

5 February 2013
To me this form is the same thing as the MFS Income allocation worksheet...

Correct, here's the rest of te article that was linked to above:

In 2011 and prior years, the community property allocation worksheet from Publication 555 was used to allocate income and deductions in community property states for married taxpayers who filed separately, registered domestic partners (Washington, Nevada, and California), and same-gender married couples (California). The existing worksheet provides fields to report total and spousal amounts for wages, interest income, dividends, the state income tax refund, capital gains and losses, pension income, rents and royalties, taxes withheld, and other items. However, the worksheet does not provide a way to specify the taxpayer’s spouse or partner. The new Form 8958 will contain all the relevant data from the current worksheet with the addition of a location for identifying each spouse.

JAD (talk|edits) said:

5 February 2013
How can the IRS make this mandatory? I can think of 100 reasons why a couple might file MFS, where one spouse might not know what's on the other spouse's return.

Kathyt (talk|edits) said:

5 February 2013
JAD - it's just for community property states. If you are splitting the income, you have to know what the other spouse's income is.

JAD (talk|edits) said:

5 February 2013
CA is a community property state. My client has a prenup, and income is separate, and they file MFS. Husband is not going to be thrilled with me, who he doesn't know, asking for his info. The column for "total income" says "community/separate", so it looks like the IRS wants both, not just the community income.

Also, in a community property state, all income is split equally unless there is a prenup. So if the form only applied to community income, the IRS wouldn't need the form. They'd already know that the income was split equally.

Kathyt (talk|edits) said:

5 February 2013
What did you do last year, didn't you have to do the MFS allocation? With Lacerte it's been required for as long as I can remember. In the past when the situation you described happened, I really wouldn't know what to do, so I'd do the only thing I could figure, is to just report my client's income & for the total & for the allocated to taxpayer, put zero in the spouse column. I don't think it's right but I could never see any other way to file, or to just paper file.

JAD (talk|edits) said:

5 February 2013
We paper filed. The client was going to e-file, but when I explained the situation, she said to paper file, which I agreed with. I'd rather paper file that file a form that states something that isn't true. I'm not a big fan of e-file anyway.

Tax Writer (talk|edits) said:

5 February 2013
We paper filed. The client was going to e-file, but when I explained the situation, she said to paper file, which I agreed with. I'd rather paper file that file a form that states something that isn't true.

That's what I would do, too. I am actually advising a client (on tax implications), he's doing a post-nup right now, modifying all their community property into non-community property. They have decided to keep their finances completely separate, to the point where neither one even has any idea what the other makes. Separate accounts, they don't see each other's checks, nothing. That's the way they want it-- I don't see any reason why the IRS doesn't have an option for post-nup/pre-nup as an opt-out. I see a lot of them.

Joanmcq (talk|edits) said:

6 February 2013
JAD, if all the income is separate, there's no need for the form or worksheet. Nor any need to ask for the other person's income. Since I have a TON of same sex couples, I've seen all permutations of this (and remember that a pension earned or property bought before the legal relationship is separate, unless there is an agreement otherwise). I've done many returns where most or all of a pension was the separate property of one spouse, and the wages of the other are community.

This form was primarily created because of the issues with same sex couple returns. Hopefully it will allow us to efile; I'm going to try my first one tonight.

JAD (talk|edits) said:

6 February 2013
That would make logical sense, but if true, then why does the column for "total income" specify "community/separate"?

Taxcpa (talk|edits) said:

8 February 2013
My question is that can we paper file without this form?

Bits1961 (talk|edits) said:

12 February 2013
My client's husband moved back to India in October. She just has wages. We have no idea what he has. How do we fill out the form?

Joanmcq (talk|edits) said:

13 February 2013
JAD, many of my couples have both community and separate property. And some has a split characteristic. (Especially pensions). If ALL of the income is separate, you wouldn't have any allocations. So no need to do the form.

When I had an MFS client in the past, for the efile worksheet, I would simply put all of the income in the filers column, and zeroes in the spouse column, since NONE of the income on the return was allocated.

Wiles (talk|edits) said:

4 April 2014
For those in community property states, what do you do?

a) File a blank form
b) Not file the form
c) Do the right thing
d) None of the above
e) All of the above

I do (b). I wish my software (Lacerte) would give me a way to fully suppress this form, so I do not have to remember to pull it out when the tax return is printed.

Joanmcq (talk|edits) said:

6 April 2014
It depends if there is any community income.

Better to have to occasionally take it out than miss it when it's needed. btw, I just did one where RDPs moved to a non-community state during the year. My software wouldn't let me efile with the form since their state of residence was CO.

Kevinh5 (talk|edits) said:

6 April 2014
JAD, in a community property state there still could be separate income. I can think of lots of examples.

Doug M (talk|edits) said:

6 April 2014
Kevin: Did SS benefits change from separate to community property in light of DOMA?

Joanmcq (talk|edits) said:

8 April 2014
Social security as community vs separate depends on the law in the particular state. But don't look to state law in CA which won't rule since it's not taxable in CA. Pat Cain makes a good argument that it should be community.

Tax Writer (talk|edits) said:

8 April 2014
JAD, in a community property state there still could be separate income. I can think of lots of examples.

A couple can decide at any time to make all their income and assets separate property, even wages, in a community property state. It's as easy as talking to a lawyer and getting a pre-nup or a post-nup (and it's possible that you can even use one of those "Nolo Press" do-it-yourself kits).

I just paper-file in those cases, because I get critical errors with the software. But in CA, at least, there is no community property if the taxpayer has deemed to classify their income otherwise. Also, according to the CA PUBS, community property also ends (FOR TAX PURPOSES) when the couple physically separates.

Wiles (talk|edits) said:

9 April 2014
That's another (b). That makes 2. Still waiting for somebody to choose (e).

JAD (talk|edits) said:

9 April 2014
All, of course I know that there can be separate income in a community property state. I'm not sure what I said that caused you to think that I didn't know that.

Wiles, what I've been doing ever since that form was issued is paper file the return, pull the form, and attach a statement saying that the taxpayer didn't file the form because she doesn't know the details of her spouse's finances, but that she believes that he filed a return, and the IRS should look to that return for the information that it wants. I haven't heard a peep from the IRS.

Wiles (talk|edits) said:

9 April 2014
Hi Jessica, I do the same thing. Do you use Lacerte? I just figured out how to suppress the Form 8958 from printing. Screen 3, Code 23 “Apply Community Property Rules” = 1. I had asked Lacerte, and they didn't know :{

Tax Writer (talk|edits) said:

9 April 2014
Wiles, what I've been doing ever since that form was issued is paper file the return, pull the form, and attach a statement saying that the taxpayer didn't file the form because she doesn't know the details of her spouse's finances, but that she believes that he filed a return, and the IRS should look to that return for the information that it wants.

This is the perfect solution. Because of the IRS' own privacy regs, how would they even be able to respond? They can't confirm or deny the existence of another taxpayer's return to a different taxpayer, whether they are married or not. We can't disclose that information, either, unless we have EXPLICIT WRITTEN PERMISSION from both parties, and even then, it's dicey. After a couple has split and is filing MFS, I stop worrying about that form. The privacy regs are a criminal provision and I would rather err on the side of caution. Especially since either taxing agency can't really challenge the return without revealing the other taxpayer's private income information, right?

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