Husband died in 2020. In PA, separate returns must be filed for deceased husband and remaining spouse, even though they can file jointly for federal purposes. Question: can I use the same Proseries tax file to prepare spouse's separate PA return, or must I create a completely new PA tax return file in Proseries for spouse?
I usually finalize the joint Federal return and the taxpayer's PA return. I also make sure that I have all items coded correctly as T, S, or J. Then I use the "Split MFJ Return" under the file menu in the homebase to prepare the spouse's PA return in the year of death. PA changed the rules several years ago stating that if one spouse dies during the year a joint return can be filed for PA income tax purposes like it is for Federal purposes in many circumstances. ProSeries has yet to fully adopt this change. If the spouse dies during the year, everything works in ProSeries, and a joint PA tax return can be prepared. If the taxpayer dies, you have to flip the taxpayer and spouse in the software in order to get it to work for PA purposes. I think someone already mentioned this solution. However, my understanding was that the same taxpayer should always be listed first on the Federal return once a joint return has been filed. Therefore, you have to maintain two files in ProSeries anyway - one for Federal because you're not supposed to arbitrarily switch the taxpayer and spouse on a Federal return, and one for PA in order to allow for joint filing in the year of death. That seems like more work than doing the "Split MFJ Return" to me, but that's a matter of opinion.
"one for Federal because you're not supposed to arbitrarily switch the taxpayer and spouse on a Federal return"
I'm not in PA so I don't tend to do that, but I'm curious where the IRS says you can't switch the taxpayer and spouse positions on the return.
Had to look it up again to make sure it hadn't changed.
From the IRS instructions for tax year 2020 Form 1040, page 14:
"If you filed a joint return for 2019 and you are filing a joint return for 2020 with the same spouse, be sure to enter your names and SSNs in the same order as on your 2019 return."
I have been switching the spouses when the husband dies for years and neither the IRS no PA has complained to me or the clients. It saves a lot of work by not having to split the returns.
Everyone should do what works good for them but I take the easiest road if there are no fines for doing so ;>}
"From the IRS instructions for tax year 2020 Form 1040, page 14:
"If you filed a joint return for 2019 and you are filing a joint return for 2020 with the same spouse, be sure to enter your names and SSNs in the same order as on your 2019 return." "
This gets filed under "When IRS says Jump, you don't have to ask How High." Do the instructions go on to say how many years in Leavenworth a violation will incur? I am all for administrative convenience because these are tough times for IRS, but I also think widows should get some respect after 50 years or so of voluntary compliance.
You're absolutely right. The form instructions are not authoritative, and in most cases there is no penalty for not complying unless the issue is also addressed by something more authoritative like the Code, Regs, etc.. I'm intrigued to find out that many people have been switching the names for years and it hasn't created any problems with the IRS. That was always my main concern....that the client would receive a notice as a result of some strange working of the IRS matching system. I would then have to take time to resolve the issue over something as simple as which name is first on the return.
Thanks for all the helpful posts! I think my practical expedient will be to leave names in the same order and file separate return for deceased husband. Surviving spouse has no PA filing requirement, because she has no PA taxable income in 2020.