Level 4

Question

How do I get Lacerte to evenly split Unemployment Compensation from Joint return into MFS return?

Forum|Forum|5 years ago
March 21, 2021
5 replies
34 views

I have a joint return where the spouse received unemployment compensation of approx. $15,000. Jointly the taxpayer AGI is about $260,000 due to $155k in L.T. C.G. Splitting the return into MFS creates a tax savings of around $3000 (with bringing each AGI below $150k & some LTG now taxed at 0% & w/the unemployment exclusion) . The taxpayer lives in a community property state and they do live together. How do I get Lacerte to split the unemployment? And does anyone know if each spouse will get $7500 exclusion on their separate return? Or does only the spouse who actually received it get $7500 unemployment excluded? I have spent hours & hours on this and can't find anything. Please help.

Lacerte Tax

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BobKamman

Level 15

Does Lacerte allow you to complete a Form 8958?

S

ShedidAuthor

Level 4

Yes, it does allow me to complete Form 8958, but those numbers do NOT flow to anywhere in the actual tax return. It is just a static allocation form.

BobKamman

Level 15

A superseding return has to be filed on paper anyway, right? It's probably faster just to start over with two new returns (don't try with a 1040-X).

abctax55

Level 15

There's a long, long discussion on a different forum (with some very learned folks) debating whether the unemployment can/should be split on a MFS return in a community property state. Given the uncertainty, I'm not filing any of the returns I have with the same fact pattern. YMMV

HumanKind... Be Both

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ShedidAuthor

Level 4

Thanks for the pointer! Would you be comfortable sharing the link to the forum? If not, would you keep this thread updated on any solid answers from that forum?

abctax55

Level 15

It isn't a public forum, and I will try to remember to post back here when there's a resolution.

HumanKind... Be Both

George4Tacks

Level 15

https://proconnect.intuit.com/community/tax-filing-status/help/individual-mfj-vs-mfs-comparison/00/5547

and

https://proconnect.intuit.com/community/state-taxes/help/community-property-states-and-the-mfj-mfs-worksheet/00/5660

This should get you started on the HOW, but not the whether there really is an advantage. IRS should make their position clear before the statute of limitations expires.

Answers are easy. Questions are hard!

BobKamman

Level 15

@George4Tacks "IRS should make their position clear before the statute of limitations expires."

And the Easter Bunny should leave you a basket full of gold coins.

George4Tacks

Level 15

WOW! Gold coins for Easter!!!!!!

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-a-eligibility

Q4. I'm married and don't file a joint return with my spouse. We live in a community property state. Are we eligible for the exclusion? (added April 29, 2021)

A4. Yes. Because you live in a community property state, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on his or her tax return. You should exclude up to $10,200 on your tax return if your modified AGI is less than $150,000. Your spouse should exclude up to another $10,200 on his or her tax return if your spouse's modified AGI is less than $150,000. Neither of you should exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7.

Answers are easy. Questions are hard!

C

cmanno

Level 3

Shedid; Did you ever get resolution to this issue. I am in the same boat to determine if UI gets split in a community prop state and the exclusion as well.

Bridgey

Level 3

Lacerte fixed this so it's working fine now

C

cmanno

Level 3

How is it handling the $10,200 exclusion between the 2 MFS returns?

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ShedidAuthor

Level 4

Finally 'some' guidance today from the IRS in FAQs posted on their site. FAQ #4 under Eligibility:

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs

Q4. I'm married and don't file a joint return with my spouse. We live in a community property state. Are we eligible for the exclusion? (added April 29, 2021)
A4. Yes. Because you live in a community property state, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on his or her tax return. You should exclude up to $10,200 on your tax return if your modified AGI is less than $150,000. Your spouse should exclude up to another $10,200 on his or her tax return if your spouse's modified AGI is less than $150,000. Neither of you should exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7.