In: Finance
juan and Estella Garcia live in Washington a community property state. juan earned $56,000 in wages and Estella earned $74,000 in wages. they will file separate returns. how much of juan's wage income will be reported on estella's return
In our case, If Juan is earning $56,000, Estella would report half of it, that is, $28,000 on her return.
Several states in USA have "community property" laws, which say that most income earned and most assets acquired during a marriage are the equal property of both spouses, regardless of whose name is on the check or the title The Internal Revenue Service (IRS) created Form 8958 to allow couples in community property states to correctly allocate income to each spouse that otherwise may not match what is reported to the IRS by their respective employers.
On Form 8958, a couple lists individual sources of income for each of them. The couple reports the total amount received from each source, then allocates a portion of the total to each person. Form 8958 essentially reconciles the difference between what employers (and other income sources) have reported to the IRS and what the spouses will be reporting on their federal tax returns. Both spouses must include a copy of the form with their tax return.