My client got divorced in a community property state during the year. She has a filing status of single.
Pub 504 says "Each spouse is taxed on half the community income for the part of the year before the community ends". Lacerte will produce form 8958, but since it's not MFS, it doesn't include the former spouse's name and SSN.
When I enter in the former spouse's name and SSN under the fields for registered domestic partner on screen 3.1, it produces a critical diagnostic saying that to use the registered domestic partner fields, it has to be a return from California, Nevada, or Washington (which it's not).
How do I get the form 8958 to properly populate her former spouse's information?
Also, how should the items of income be entered? If I enter her former spouse's W-2 information, but only include the income and withholding allocated to her, will that cause problems in processing the returns?
If I have to file by paper, then I'll ignore the critical diagnostic of the return having to be in California, Nevada, or Washington and just fill in the former spouse information on the registered domestic partner fields rather than having to write it on after the fact.
It just seems really odd that this type of situation is being ignored in the software - it makes me worried that I'm missing something and/or doing it wrong.
There are many cases where the former spouses are trying to do everything right, and it's quite possible that a couple could be sharing a "community" for several months before splitting and being divorced by the end of the year. However, there are many other cases where revenge and retribution play a big part in how one, or the other, files. Be sure that the community was still recognized under state law, for the time you are splitting the income. And be sure the divorce was final before the end of the year.