EDITOR's Clarification note: At around the 21 minute mark, I misstated the following: "You cannot take the child tax credit or the credit for other dependents (ODC) on Schedule 8812 if you're married & filing a separate return." You can do this, even though the income phaseout begins at $200,000 instead of $400,000. Only one parent can claim a credit (either the CTC or ODC, but not both) for each child in a year.
Thanks for the video! Still very confused.. Is this merely a form allocating numbers as a “nice to know” for the IRS, or do we actually have to go back to other schedules on our taxes and change the income amounts based on how it’s split here? My husband and I have regular employment income that’s in the same salary range - but zero joint bank or investment accounts. Everything is very separate. Trying to understand if this is documentation, or a calculation that changes all the math on the remainder of the tax return (ie. Income would no longer be what’s reflected on W2 and need to be manually changed).
This form helps the IRS reconcile tax return information that is reported by the individual taxpayers as well as the employers or other income payers. Because community property states allocate income differently from non-community property states, it can be difficult to reconcile income and other tax items for separate filers without this form. Your income, deductions, and credits should reflect what is reported on your separate returns. Married couples filing a joint return do not have to complete this form, since all reportable items go on the same return.
Hey Forrest, great video. Do you report 1/2 of community wages, interest, withholding, etc. on the 1040 and then show the allocation on 8958? Or do you show all that a taxpayer had on their W-2, for example, and then make a Schedule 1 adjustment to income? I had an issue last year with the IRS not recognizing the withholding for a taxpayer because it didn't match their W-2, even with the 8958? Any thoughts?
Kevin, sorry for not noticing this until now. It sounds like you followed the instructions as written: You must report half of all community income and all of your separate income on your federal income tax return if you file a federal income tax return separately from your spouse or RDP. It also says very similar things in the Form 1040 instructions and in Publication 555. What did they tell you that you were supposed to do? I don't see anything in the W-2 or Schedule 1 instructions about adjustments based on a Form 8958 entry. Below links are for reference in case anyone following this is interested: IRS Schedule 1, Additional Income and Adjustments to Income Article: www.teachmepersonalfinance.com/irs-schedule-1-instructions/ Video: th-cam.com/video/TUMnegmniDI/w-d-xo.html IRS Form W-2, Wage and Tax Statement Article: www.teachmepersonalfinance.com/irs-form-w-2-instructions/ Video: th-cam.com/video/6pQF29rrizc/w-d-xo.html
Great video, but I have a question. I've been trying to figure this out for a few days now. For MFS, how do you go about entering a 1099-R? I understand (I think) this would be listed on Form 8958 and divided equally between both spouses. However, how is it entered when completing the 1040? For the W-2 entry, it seems I would enter a W-2 for both spouses on each return separately and divide the income and taxes in half, but what about the 1099-R?
Such a great video! Thank you for making this. So glad I found this post! I have been struggling with this for days now. My wife and I are Married Filing Separately in California. All of our income is community income (W2, 1099-INT, 1099-DIV everything is a joint account). I understand that I need to add up all of our income using form 8958 and divide everything 50-50. Now, once I do that, do I use the amount from form 8958 (i.e. calculated wages and taxes etc) and use that to fill the data in form 1040 (line 1a, 2a, etc) instead of what is reported in my individual W2? Example, if my W2 wage is 50K and my wife's 100K. In form 8958, I will add 50+100=150 and divide by 2 to get 75K. So, in my 1040 line 1a, do I write 75K? And same for my wife?
That would appear to be the case. From the form instructions: You must report half of all community income and all of your separate income on your federal income tax return if you file a federal income tax return separately from your spouse or RDP (registered domestic partner).
Thank you for the reply! Appreciate it. We also made estimated tax payment. I should use 8958 to divide that 50-50 as well, correct? ( our withholding was less than what it should have been, so we had to make the estimated tax payment).
It’s great video! Thanks a lot My husband got two w-2. One is from foreign country and the other one from Texas which we live in. That foreign income should be on line 1, too and splitted with me ? Thanks in advance
As far as I understand (I'm not a lawyer, so I cannot state this as a legal opinion), but unless Texas has special rules about foreign earned income, then I believe that both W-2s should be included on the form.
IRS Form 8958 doesn't really go into detail about the mechanics, since the form's primary purpose is to allocate items of income that might be reported elsewhere (such as 1099 forms, W-2s, etc.) that are hard to capture in a separate return. IRS Publication 555 discusses in a little more detail, but still tries to avoid state-specific issues. A couple of observations: 1. The IRS considers taxpayer status as of the last day of the year, generally, regardless of how long during the year a couple was married (or divorced). I don't see anything in the form instructions or publication to contradict this point. 2. More importantly is whether or not the taxpayers lived apart or together. There are certain rule changes for reporting community income for couples who physically live apart. From Publication 555: *Spouses living apart all year.* If you are married at any time during the calendar year, special rules apply for reporting certain community income. You must meet all the following conditions for these special rules to apply: 1. You and your spouse lived apart all year. 2. You and your spouse didn't file a joint return for a tax year beginning or ending in the calendar year. 3. You and/or your spouse had earned income for the calendar year that is community income. 4. 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. If this applies, then Publication 555 goes into a little more detail (beyond these comments) about how to treat each income item: www.irs.gov/pub/irs-pdf/p555.pdf
Where do you see that you can't claim the Child Tax Credit on Schedule 8812 if you file MFS. I mentioned that around the 21 minute mark and I don't think that's true.
Thank you for clarifying that! You are correct, so I'll pin a clarifying comment at the top of the comments section. The income limits are cut in half for the CTC and the ACTC, but you can still take it. The child and dependent care credit is not available for taxpayers filing separate returns (at least according to Publication 501).
Hello--we would like to file separately this year and live in Texas. My husband has a w2 and I have a 1099NEC, but will be claiming business expenses. Do I put down exactly what my 1099NEC states as my income on my husband's form, or what my income ended up being once the expenses were deducted? I'm so confused. If my husband has to claim 1/2 of my total 1099 wages, does he also need to claim half the buisness deductions I get?
According to the form instructions, you and your husband would split the self-employment income (line 5), after you've taken all expenses out. However, you would be responsible for paying all of the self-employment tax (Line 10), because it is credited to your Social Security and Medicare record.
Me and my wife don't have student debt, don't have any dependents, we don't care about tax credits as we always have 0. If want to file separately we have to go through this? Why? We literally don't care where the money goes as we use it together...
No pension, no property, no self employment, no children, no stocks, no crypto. Like we're vanilla. How do I magically fill out things that don't exist in our lives. I don't understand this whatsoever.
I believe the IRS makes this form available so that your separate Form 1040s match the income items that are reported to you (and the IRS) within the context of community property law. I don't believe that you're supposed to enter bank accounts, but the interest income that may have been reported to you on IRS Form 1099-INT: IRS Form 1099-INT, Interest Income Article: www.teachmepersonalfinance.com/irs-form-1099-int-instructions/ Video: th-cam.com/video/WBnysIIwrl0/w-d-xo.html
For community property states, generally capital gains are split on this form equally between each spouse, regardless of whose name is on the account, *unless* the account has always been considered a separate account under the community property rules of your state.
For business expenses from self-emloyment income, is that included in number 12? And does that need to be broken down into detail (advertising, office expenses, etc) or can I just put 'business expenses' and the totaL?
Although the form instructions don't exactly specify this, I believe the intent is for your net self-employment tax (before the deduction for 1/2 SE tax) to go into Line 5. Then Lines 9 & 10 contain the tax itself and deduction for the SE tax. I don't know that any SE income items go into Line 12.
Question. If my husband and I file MFS in a community property state (Texas), how do you enter a 1099-R on the 1040? I understand that you would list this "income" under the pension category (I believe) on form 8958 and split in half for the allocations and then again at the bottom for taxes paid, but how does it get entered when putting together the taxes? Do you enter the 1099-R for both returns and divide it even though that is not how the 1099-R is filled out? It's quite confusing and I've been pulling my hair out trying to figure this all out. Thank you!
I think this depends on what the source of income is for the 1099-R. According to the form instructions, the following guidance pertains to IRAs: These distributions are wholly taxable to the spouse or RDP whose name is on the account. That spouse or RDP is also liable for any penalties and additional taxes on the distributions.
Most likely. Most likely, 1099-NEC income would be considered self-employment income. So you might consider entering this information in Line 5, then accounting for the SE tax in Lines 9 & 10.
The form instructions and IRS Publication 555 appear to be silent on what happens if there is a change in marital status during the year. My read is this: your marital status for the *entire tax year* is based upon your status as of the last day of that tax year. So, if you are married filing a separate return, all of your income would be reported on your tax return. And that income should be accounted for properly for one spouse or the other on this form. If you're married filing a joint tax return, then you wouldn't need to complete this form in the first place.
My wife and I are living in 2 different states filing married separately. but haven't divorced yet and haven't lived together for 2 years.I'm in California and shes in Maine . do i still need to file this
To be honest, I don't know. Much of this depends on community property laws in California, which is beyond my purview (I cannot give legal advice). My guess is that California would have an economic incentive to maximize the amount of your income that is subject to CA state tax. By completing this form, you are at least demonstrating that part of this income belongs to you (presumably subject to CA tax), and that some of it belongs to your wife (not subject to CA tax, but ME tax). You might not need to file this form, but you might be better off doing so. What I might recommend is discussing this with a tax professional who has experience in handling CA state tax returns for MFS couples living in separate states.
EDITOR's Clarification note:
At around the 21 minute mark, I misstated the following: "You cannot take the child tax credit or the credit for other dependents (ODC) on Schedule 8812 if you're married & filing a separate return." You can do this, even though the income phaseout begins at $200,000 instead of $400,000. Only one parent can claim a credit (either the CTC or ODC, but not both) for each child in a year.
Thanks for the video! Still very confused..
Is this merely a form allocating numbers as a “nice to know” for the IRS, or do we actually have to go back to other schedules on our taxes and change the income amounts based on how it’s split here?
My husband and I have regular employment income that’s in the same salary range - but zero joint bank or investment accounts. Everything is very separate.
Trying to understand if this is documentation, or a calculation that changes all the math on the remainder of the tax return (ie. Income would no longer be what’s reflected on W2 and need to be manually changed).
This form helps the IRS reconcile tax return information that is reported by the individual taxpayers as well as the employers or other income payers. Because community property states allocate income differently from non-community property states, it can be difficult to reconcile income and other tax items for separate filers without this form.
Your income, deductions, and credits should reflect what is reported on your separate returns. Married couples filing a joint return do not have to complete this form, since all reportable items go on the same return.
Hey Forrest, great video. Do you report 1/2 of community wages, interest, withholding, etc. on the 1040 and then show the allocation on 8958? Or do you show all that a taxpayer had on their W-2, for example, and then make a Schedule 1 adjustment to income? I had an issue last year with the IRS not recognizing the withholding for a taxpayer because it didn't match their W-2, even with the 8958? Any thoughts?
Kevin, sorry for not noticing this until now.
It sounds like you followed the instructions as written: You must report half of all community income and all of your separate income on your federal income tax return if you file a federal income tax return separately from your spouse or RDP. It also says very similar things in the Form 1040 instructions and in Publication 555.
What did they tell you that you were supposed to do? I don't see anything in the W-2 or Schedule 1 instructions about adjustments based on a Form 8958 entry. Below links are for reference in case anyone following this is interested:
IRS Schedule 1, Additional Income and Adjustments to Income
Article: www.teachmepersonalfinance.com/irs-schedule-1-instructions/
Video: th-cam.com/video/TUMnegmniDI/w-d-xo.html
IRS Form W-2, Wage and Tax Statement
Article: www.teachmepersonalfinance.com/irs-form-w-2-instructions/
Video: th-cam.com/video/6pQF29rrizc/w-d-xo.html
For item 11 is that just federal taxes or federal and state combined?
The form instructions don't clarify this, but if I had to guess, I would say federal tax only.
Great video, but I have a question. I've been trying to figure this out for a few days now. For MFS, how do you go about entering a 1099-R? I understand (I think) this would be listed on Form 8958 and divided equally between both spouses. However, how is it entered when completing the 1040? For the W-2 entry, it seems I would enter a W-2 for both spouses on each return separately and divide the income and taxes in half, but what about the 1099-R?
Such a great video! Thank you for making this.
So glad I found this post! I have been struggling with this for days now. My wife and I are Married Filing Separately in California. All of our income is community income (W2, 1099-INT, 1099-DIV everything is a joint account).
I understand that I need to add up all of our income using form 8958 and divide everything 50-50. Now, once I do that, do I use the amount from form 8958 (i.e. calculated wages and taxes etc) and use that to fill the data in form 1040 (line 1a, 2a, etc) instead of what is reported in my individual W2?
Example, if my W2 wage is 50K and my wife's 100K. In form 8958, I will add 50+100=150 and divide by 2 to get 75K. So, in my 1040 line 1a, do I write 75K? And same for my wife?
That would appear to be the case. From the form instructions:
You must report half of all community income and all of your separate income on your federal income tax return if you file a federal income tax return separately from your spouse or RDP (registered domestic partner).
Thank you for the reply! Appreciate it.
We also made estimated tax payment. I should use 8958 to divide that 50-50 as well, correct? ( our withholding was less than what it should have been, so we had to make the estimated tax payment).
@@sumeetos That's correct. If you made an estimated tax payment, then each of you should be able to claim 50% of that as a tax payment on Line 11.
It’s great video! Thanks a lot
My husband got two w-2. One is from foreign country and the other one from Texas which we live in.
That foreign income should be on line 1, too and splitted with me ?
Thanks in advance
As far as I understand (I'm not a lawyer, so I cannot state this as a legal opinion), but unless Texas has special rules about foreign earned income, then I believe that both W-2s should be included on the form.
Great video, have one question. What happens when you are married 7/1/23? Taxpayers are filing separate for 2023 by choice and live in Texas
IRS Form 8958 doesn't really go into detail about the mechanics, since the form's primary purpose is to allocate items of income that might be reported elsewhere (such as 1099 forms, W-2s, etc.) that are hard to capture in a separate return.
IRS Publication 555 discusses in a little more detail, but still tries to avoid state-specific issues. A couple of observations:
1. The IRS considers taxpayer status as of the last day of the year, generally, regardless of how long during the year a couple was married (or divorced). I don't see anything in the form instructions or publication to contradict this point.
2. More importantly is whether or not the taxpayers lived apart or together. There are certain rule changes for reporting community income for couples who physically live apart.
From Publication 555:
*Spouses living apart all year.* If you are married at any time during the calendar year, special rules apply for reporting certain community income. You must meet all the following conditions for these special rules to apply:
1. You and your spouse lived apart all year.
2. You and your spouse didn't file a joint return for a tax year beginning or ending in the calendar year.
3. You and/or your spouse had earned income for the calendar year that is community income.
4. 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.
If this applies, then Publication 555 goes into a little more detail (beyond these comments) about how to treat each income item: www.irs.gov/pub/irs-pdf/p555.pdf
Where do you see that you can't claim the Child Tax Credit on Schedule 8812 if you file MFS. I mentioned that around the 21 minute mark and I don't think that's true.
Thank you for clarifying that! You are correct, so I'll pin a clarifying comment at the top of the comments section. The income limits are cut in half for the CTC and the ACTC, but you can still take it. The child and dependent care credit is not available for taxpayers filing separate returns (at least according to Publication 501).
Hello--we would like to file separately this year and live in Texas. My husband has a w2 and I have a 1099NEC, but will be claiming business expenses. Do I put down exactly what my 1099NEC states as my income on my husband's form, or what my income ended up being once the expenses were deducted? I'm so confused. If my husband has to claim 1/2 of my total 1099 wages, does he also need to claim half the buisness deductions I get?
According to the form instructions, you and your husband would split the self-employment income (line 5), after you've taken all expenses out. However, you would be responsible for paying all of the self-employment tax (Line 10), because it is credited to your Social Security and Medicare record.
Me and my wife don't have student debt, don't have any dependents, we don't care about tax credits as we always have 0. If want to file separately we have to go through this? Why? We literally don't care where the money goes as we use it together...
What? #2 wants me to fill in how much money was in my bank before we got married? We've been married for years now...what?
The $ amount in our joint bank account changes literally multiple times a day... how do they want accuracy on that? What?
No pension, no property, no self employment, no children, no stocks, no crypto. Like we're vanilla. How do I magically fill out things that don't exist in our lives. I don't understand this whatsoever.
I believe the IRS makes this form available so that your separate Form 1040s match the income items that are reported to you (and the IRS) within the context of community property law. I don't believe that you're supposed to enter bank accounts, but the interest income that may have been reported to you on IRS Form 1099-INT:
IRS Form 1099-INT, Interest Income
Article: www.teachmepersonalfinance.com/irs-form-1099-int-instructions/
Video: th-cam.com/video/WBnysIIwrl0/w-d-xo.html
How does this split work for capital gains? I’m using HR block and proceeds are calculated automatically based on the total sell price
For community property states, generally capital gains are split on this form equally between each spouse, regardless of whose name is on the account, *unless* the account has always been considered a separate account under the community property rules of your state.
For business expenses from self-emloyment income, is that included in number 12? And does that need to be broken down into detail (advertising, office expenses, etc) or can I just put 'business expenses' and the totaL?
Although the form instructions don't exactly specify this, I believe the intent is for your net self-employment tax (before the deduction for 1/2 SE tax) to go into Line 5. Then Lines 9 & 10 contain the tax itself and deduction for the SE tax. I don't know that any SE income items go into Line 12.
Question. If my husband and I file MFS in a community property state (Texas), how do you enter a 1099-R on the 1040? I understand that you would list this "income" under the pension category (I believe) on form 8958 and split in half for the allocations and then again at the bottom for taxes paid, but how does it get entered when putting together the taxes? Do you enter the 1099-R for both returns and divide it even though that is not how the 1099-R is filled out? It's quite confusing and I've been pulling my hair out trying to figure this all out. Thank you!
I think this depends on what the source of income is for the 1099-R. According to the form instructions, the following guidance pertains to IRAs:
These distributions are wholly taxable to the spouse or RDP whose name is on the account. That spouse or RDP is also liable for any penalties and additional taxes on the distributions.
Great video and just what I needed! If a client has a 1099-NEC would that income be included on Form 8958 too?
Most likely. Most likely, 1099-NEC income would be considered self-employment income. So you might consider entering this information in Line 5, then accounting for the SE tax in Lines 9 & 10.
How does this change when you get married in the filing year (i.e. married May 1st 2023). Do you only add the wages starting after that date?
The form instructions and IRS Publication 555 appear to be silent on what happens if there is a change in marital status during the year.
My read is this: your marital status for the *entire tax year* is based upon your status as of the last day of that tax year. So, if you are married filing a separate return, all of your income would be reported on your tax return. And that income should be accounted for properly for one spouse or the other on this form.
If you're married filing a joint tax return, then you wouldn't need to complete this form in the first place.
My wife and I are living in 2 different states filing married separately. but haven't divorced yet and haven't lived together for 2 years.I'm in California and shes in Maine . do i still need to file this
To be honest, I don't know. Much of this depends on community property laws in California, which is beyond my purview (I cannot give legal advice).
My guess is that California would have an economic incentive to maximize the amount of your income that is subject to CA state tax. By completing this form, you are at least demonstrating that part of this income belongs to you (presumably subject to CA tax), and that some of it belongs to your wife (not subject to CA tax, but ME tax). You might not need to file this form, but you might be better off doing so.
What I might recommend is discussing this with a tax professional who has experience in handling CA state tax returns for MFS couples living in separate states.
thank you @@teachmepersonalfinance
For W2 wages, should we be putting wage amount from box 1 or box 3?
You should use the Box 1 amount.