Married filing Separately -- where to put shared items?

Discussion in 'Tax' started by CallMeZoot, Feb 2, 2008.

  1. CallMeZoot

    CallMeZoot Guest

    After crunching some numbers I have figured out that it MIGHT work out
    better if my wife and I file as "Married Filing Separately" (she has
    several part time jobs which significantly under-withheld based on our
    combined income).

    We have a few shared items in both of our names, including:

    -Mortgage Interest
    -Property Taxes
    -A small amount of 1099-misc income
    -A small amount of savings interest

    What are our options for these items when filing separately?
    Specifically...

    -Can we put them on whichever return we prefer (depending on what
    works out to the least tax liabliity)?
    -Can we "split them up" -- e.g. put half of the mortgage interest on
    mine, half on hers? or in a 60/40, etc. split?
    -Are there any regulations for how to divide them (e.g. do property
    taxes and mortgage interest have to be on the same return?)
    -Do we have to somehow document on one return that the "missing items"
    are on the spouse's return?

    Any advice would be appreciated.
     
    CallMeZoot, Feb 2, 2008
    #1
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  2. CallMeZoot

    Mark Bole Guest

    That alone is usually not enough to make MFS better than MFJ. How much
    of an advantage does your initial estimate lead to? Are you losing
    credits and subject to stricter limitations under MFS?
    No. First, if you are in a community property state, special rules
    apply -- in short, community income is split 50-50 regardless of who it
    originated with. Second, income belongs to the person who either earned
    it or owns the property which generated it, so that is what is reported
    on each person's return. Third, deductions belong to the person who
    owed the money and who actually paid it out of their own funds.
    (Exceptions apply, but that's the general principle).
    It would be a good idea.

    -Mark Bole
     
    Mark Bole, Feb 3, 2008
    #2
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  3. CallMeZoot

    D. Stussy Guest

    If you live in a "community property state" (there are 15 of them), then
    your split is pretty much mandated at 50% each for every item mentioned per
    state law.

    Otherwise, the 1099-Misc income belongs to the ONE wh is the
    sole-proprietor. The other items may be split as you see fit. By
    indicating MFS and identifying your spouse, you've done all you need to do
    regarding the "missing items" issue.
     
    D. Stussy, Feb 3, 2008
    #3
  4. CallMeZoot at wrote on 2/2/08 4:00 PM:
    If you are both on the loan, allocate it any way you wish.
    If you jointly hold title to the property, anyway you wish.
    If self employment it should be whoever owns the business. If gambling
    winnings, it should go with the gambler.
    If joint account it can go either way but you should report it under the SSN
    that reported it to the IRS and then subtract it out with a comment
    transferring it to the other SSN. Then report it on the other person's
    return.
    Yes, if they were reported to the IRS on a 1099 type form. The IRS will
    look for them where reported.

    All freely provided advice guarantee correct or double your money back

    Frank S. Duke, Jr. CPA
    Cincinnati, OH USA
     
    Frank S. Duke, Jr., Feb 3, 2008
    #4
  5. CallMeZoot

    Mark Bole Guest

    D. Stussy wrote:
    [...]
    Wrong, there are nine. See Pub 555.

    -Mark Bole
     
    Mark Bole, Feb 3, 2008
    #5
  6. CallMeZoot

    Bob Sandler Guest

    If you live in a "community property state" (there are 15 of them)

    1. Arizona
    2. California
    3. Idaho
    4. Louisiana
    5. Nevada
    6. New Mexico
    7. Texas
    8. Washington
    9. Wisconsin

    What are the other 6?

    Bob Sandler
     
    Bob Sandler, Feb 3, 2008
    #6
  7. CallMeZoot

    D. Stussy Guest

    Brain freeze here. You're right. I was thinking of "common law" states -
    of which there are 15.
     
    D. Stussy, Feb 3, 2008
    #7
  8. CallMeZoot

    Mark Bole Guest

    The first problem with this is, since information on MFS returns is not
    necessarily available to the other spouse, how could one arbitrarily
    split up income and deductions and ensure they are not double-reported?

    See Table 1 in Pub 504 (page 5, for 2007 tax year). There are indeed
    rules for dividing Schedule A deductions on MFS returns.

    -Mark Bole
     
    Mark Bole, Feb 3, 2008
    #8
  9. CallMeZoot

    Alan Guest

    If we want to get technical... the National Conference of State
    Legislatures says:

    "Currently, only 10 states (Alabama, Colorado, Kansas, Rhode
    Island, South Carolina, Iowa, Montana, Oklahoma, Pennsylvania and
    Texas) and the District of Columbia recognize common-law
    marriages contracted within their borders. In addition, five
    states have "grandfathered" common law marriage, allowing those
    established before a certain date to be recognized. New Hampshire
    recognizes common law marriage only for purposes of probate, and
    Utah recognizes common law marriages only if they have been
    validated by a court or administrative order."
     
    Alan, Feb 3, 2008
    #9
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