Preparing Community Property Returns for Registered Domestic Partners or Same-Sex Married Couples in California, Nevada, or Washington

Couples in a registered domestic partnership (RDP) or same-sex marriage in California, Nevada, and Washington are now required to prepare their single federal tax returns based on their state's community property rules. Background info

Both partners must report their share of community property income. Each type of income can be split differently, depending on pre-determined agreements like nuptials, time when the income was earned, residency, and other factors.

Given this, it’s not possible for TurboTax to figure out what your share of community property is; each couple will need to determine this for themselves. Please refer to IRS Publication 555 for guidance on how to determine and properly split community income.

You can, however, file your returns in TurboTax by following the steps below. But before you proceed, we strongly urge you to read IRS Publication 555.

First, make sure your TurboTax 2011 software is fully up-to-date before preparing your return.

Begin by completing a tax return for both persons, as you'll need the amounts for different income categories, tax amounts, and all tax payments for each person.

In the Personal Info tab, enter your personal information in TurboTax.

1. On the Were You Married? screen, choose Registered Domestic Partnership (RDP) or In a same-sex marriage as appropriate for your situation.
2. On the following screen, choose this is the single community property return I will file with the IRS.

If you wish to review or change your filing status, return to the Personal Info tab and under Your Personal Info, select Edit next to Your Filing Status.

1. On the Review Your Filing Status screen, check Change my filing status.
2. Important! Click on EasyGuide on the pop-up text.
3. Choose Registered domestic Partnership, civil union, same-sex marriage from the list and Continue.
4. On the next screen, select My state recognizes our relationship and this is our married return for state filing, then continue. This choice applies to California, Nevada, and Washington states.
5. Answer the citizenship and living questions, and choose your filing status as either Married Filing Joint or Married Filing Separate.

If TurboTax determined your status is Single or Head of Household, you do not need to allocate your income or continue with these steps.

If you choose Married Filing Separately, a screen alerts you to community property rules. When fiing Married Filing Separate in community property states, you need to allocate you income between the two of you by continuing with these steps.

Begin by completing a Married Filing Separate tax return for both persons, as you'll need the amounts for different income categories, tax amounts, and all tax payments for each person. Remember, if one of you itemizes deductions both of you must itemize, or both must use the standard deduction. Enter each of your income and withholding or estimated payments in TurboTax as they were reported to you.

Complete the Income, Deductions & Credits, and Other Tax Situations sections.

Use your community property state rules to determine what adjustments you expect to enter in TurboTax.  Bear in mind that different types of income may be split according to different rules. Often one return has an addition to income and withholding, while the other will have a reduction (subtraction) to income and withholding.

In the Federal Tax tab under Other Tax Situations, select the Done With Other button. Note these adjustment screeens are only available when filing Married Filing Separate in a community property state.

On the Community Property Income Adjustments screen, enter the adjustment amount in one of the fields. This is the amount necessary to adjust your income to your share of the community property.

• Enter any additional income for this return in the Addition Adjustment field
• Enter any income reduction for this return in the Subtraction Adjustment field

A positive number must be entered for either amount. When done, select Continue.

On the Tax withholding Adjustments screen, enter the adjustment amount (if any) in one of the fields. This is the amount necessary to adjust your tax payements to your share of the community property.

• Enter any additions for tax withholding or estimated tax payments on this return in the Withholding - Addition Adjustment field
• Enter any reductions for tax withholding or estimated tax payments on this return in the Withholding - Subtraction Adjustment field

Again, enter only positive numbers to make either adjustment. If you make an addition in one tax return, there needs to be a matching reduction in the other tax return.

When done with your entries, select Continue.

When filing as Married Filing Separately in a community property state, this worksheet is required and will be included with your federal tax return. The worksheet shows how the income on this tax return compares with the other taxpayer's return.

1. You should see the Enter Your Spouse’s Community Income screen.
2. Your federal taxes should show in the first (You) column.
3. Manually enter the amounts from your spouse/partner’s return in appropriate lines of the second (Spouse) column.
4. Select the Calculate Totals button. A third column will show the Totals. The totals should equal your combined income amounts.

Use these columns to see how the allocation appears compared to your state tax rules. Allocation calculations between taxpayers are subject not only to state law, but to individual circumstances. The split is not necessarily 50/50. Refer to your state tax department for their rules.

You can make changes to the Spouse column, then select Recalculate to show the changes. To adjust your amounts in the You column, select the Back button. At the Other Tax Situations screen, select Done With Other. Make your adjustments, then continue to the worksheet and calculate the new totals.

If you make an addition on one tax return, there should be a matching reduction in the other tax return. The Totals column must show the totals for each line and for your total combined income.

Once you have determined how to split both your combined income and the tax withholding and payments between you, continue with your state tax return.

 Complete the spouse/partner's federal tax return for the other half of the adjustments. Enter or check all other information necessary for both state returns. Be sure to review your federal and state returns for completeness and accuracy when you are finished.

If your tax return is rejected, print the tax return with the community property worksheet and mail them into the IRS.

If you previously filed a tax return and need to amend it, TurboTax can handle that for you. After you open TurboTax, click the Amend a Filed Return button at the bottom of the opening screen. More info

Should you need to revisit a screen or area in the interview, use the search function in TurboTax and enter the terms below to quickly jump to a particular screen.

• RDP will take you to the Let’s Work on Your Personal Info screen
• RDP income adjustment will take you to the Community Property Income Adjustment screen*
• RDP tax payment adjustment will take you to the Tax Payments Adjustments screen
• Community property worksheet will take you to the Enter Your Spouse's Community Income screen

You may have to file more than one state tax return if you moved from one state to another during the year, or you received income that needs to be reported to another state.

It’s complicated when one state legally recognizes your relationship and has community property rules, but other states do not. TurboTax handles the preparation of all state tax returns and makes available all the necessary forms you will need to file.

However, because of the complexity and lack of clarity on the various state(s) rules regarding RDP, civil unions, or same-sex marriages and the application of community property rules, TurboTax is not able to give you guidance tailored to your specific situation if you need to file nonresident or part-year state tax returns.

If you are in this situation, you may need to seek help from a professional tax preparer to complete these types of returns. Prior to meeting with a preparer we suggest you complete your various Federal returns and your resident state tax return.

The IRS Office of Chief Counsel issued a memorandum on May 28, 2010 stating that with the modification of the California Registered Domestic Partners Act on January 1, 2007, which extended full community property treatment to registered domestic partners, those partners in California must prepare their single federal tax returns based on the state’s community property rules.