Married Filing Separately - Itemizing

[zeros]

Couple are Wisconsin residents and separated since August 2009. Married in 2008. She owned the house and is planning to itemize her deductions. The software does not allow me to file EF because it requires financial data from the husband. They are not on speaking terms so that information is not available. I used MFS as her filing status and the return will be mailed in.. I would assume that he is required to itemize also. How does work out if he takes the standard deduction? Does IRS resolve this? Never had one like this before. Any help?

[mblatour]

I just dealt with this last week

for the first time as well. If you reference Pub. 501 on page 7, under the filing status of MFS it states the following:

11. If you spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

I had no problem E-filing a MFS return today and I was not required to put in any of the other spouse financial information. I just marked the filing status as MFS and marked the box that they did not live together for the entire year - maybe that made a difference with the E-filing issue you were having. These spouses are only communicating through lawyers and DID NOT want the other to know how much they made........although it will probably come out in court later on anyway.

I wondered about how the IRS handles when one spouse files with the standard and the other itemizes. I'm sure it must happen. Luckily the husband who could have itemized chose not to because the wife would have really been hit harder. The amount he would have got back wasn't worth "making more waves" he figured.

I don't know if this helps you or not.

Becky

[Burke]

In my experience, the IRS never puts two and two together automatically in these cases and I know it happens all the time. It might come up on audit.

[zeros]

I think the problem is the state - Wisconsin

I think its a communal state therefore the other financial information is needed. Software is aware of this.

[Jesse]

Wisconsin is a Community Property State

http://www.dor.state.wi.us/pubs/pb109.pdf

It can get messy.

[Gary]

Living Conditions

If they lived apart all year, then they can each claim only their income (except joint interest income). That is why it worked for you. If they lived together any time during the year, then they must include all community property and divide by 2 (In some community property state, income earned after separation but before a decree of divorce continues to be community property. In other states, it is separate property). See Pub 555.

[zeros]

State Problem Only?

Is the issue of supplying the spouse's income only relevant for the state return and not the federal?

[spencer]

I generally

discuss the issue of itemizing vs standard with the client then file however the client feels wil lwork. State asks for spouse's income. If unknown, I many times enter client's best estimate. Is this poor ethics? If you think so, I'd better mend my ways.

[Jesse]

Is the issue of supplying the spouse's income only relevant for the state return and not the federal?

If you and your spouse live apart all year, for Wisconsin
income tax purposes you must report your
income under the marital property law unless one of
the above three exceptions in Wisconsin law applies.
Federal law differs in that if you live apart from your
spouse at all times during the taxable year and meet
three other conditions, you must disregard certain
state community property laws for federal income
tax purposes (generally called the “living apart all
year rule”). Wisconsin doesn’t follow this federal
treatment of spouses living apart all year.

Check out the pub 109 page 9 and 10.
Page 9 C. Innocent Spouse Rule - this will fly if both agree, but I encourage the taxpayer I am working with not to file in haste. If client files and is later notified by the other (ex)spouse they must then amend their tax return to include the income in notification but cannot now allocate any of their income back to the other spouse - essentially they're screwed. And notification can take place up to the due date including extensions. There are some examples on page 10 of the Pub 109.

[Black Bart]

My two cents worth.

...I used MFS as her filing status and the return will be mailed in.. I would assume that he is required to itemize also...

So would I.

How does work out if he takes the standard deduction?...

If IRS ever DID work it out, I think they would set the first filer's selected method as the standard to be matched and then the second filer's method would have to be identical or change it (sort of like -- the first EIC filer gets the kid, right or wrong).

Does IRS resolve this?

I don't think they do. I agree with Burke -- I know it happens, but it appears they don't cross-check these things. I've never seen, met, or heard of any preparer who's actually had any dealing with IRS at all on this issue.

Never had one like this before. Any help?

I have run across maybe three or four of these over many years and, since no information was available, I simply filed whichever way was best for my client and told them it was possible we might have to amend. None of them ever had a kickback on it to my knowledge. I don't think there's much risk of audit or that you/they will actually ever hear anything about it again.