All States Edition of The Tax Book

[peggysioux]

Under the California tab of filing status, the Tax Book reads:

"Taxpayers who file a joint federal return can file separately for CA if either spouse was a nonresident for the entire year and had no income from CA sources during the year. Note: If the spouse earning the CA source income is domicilied in CA (a community property state), then the community income will be split equally between the spouses and both spouses will have CA source income. In this case if a joint federal return is filed, the CA return must also be filed jointly."

So, would the only time a separate return be able to be filedfor CA if the CA spouse had NO income for CA?? All other times, if taxpayers filed MFJ for federal, they would also have to file MFJ for CA, even though there is an exception?? Am I understanding correctly??

Question 2 - I have clients that are married, but husband resides all year in CA and wife resides all year in North Carolina. CA is a community state and NC is not. Both taxpayers are retired and receive pensions and social security, no wages. It benefits them to file MFJ for federal, but husband would like to file MFS for state returns because he would like the wife to be responsible for the NC state tax and he be responsible for the CA state tax. But, if they file MFJ for federal, wouldn't half of his pension be included in her income??

Thanks for your input!!!

[Bees Knees]

TTB, page 14-5 has general rules for community property and community income. Basically, income earned from community property, salaries, wages, and real estate that is treated as community property is community income. Such income would require a joint CA return if a joint federal return is filed. Separate income that does not have to be reported as community income is income earned from separate property, such as real estate owned separately before marriage, money earned while residing in a noncommunity property state, separate inherited property, etc.

It does not say anything about pension income, so I don't know if that can be treated as separate income. I suppose it depends on the circumstances of who, what, and where the income was earned that generated the pension income.

Someone from CA needs to clarify if pension income can be considered separate income.