month in
retirement pay, $500 of that amount is considered community income, $250
of it is his income, and $250 of it is his wife's income.
If you were born before January 2, 1938, and received a
lump-sum distribution from a qualified retirement plan, you may be able
to choose an optional method of figuring the tax on the distribution,
unless you elect the 10-year tax option. In that case you don't need to follow
the community property laws.
To illustrate a little more, Don and Rita White have three dependent children and they
live in Nevada. If Don and Rita file separately, Don and Rita can agree
that one of them will claim the exemption for one, two or all of their
children.
If you think you may owe estimated tax and want to pay
the tax separately, determine whether you must pay it by taking into
account, half of the community income and half of the deductions. You
also take into account all of your separate income and deductions. You also
determine if you must pay estimated tax by taking into consideration your
own exemption and any exemptions for dependents that you are able to claim
and may half you lower you tax liability.
It is important to note thought, that just because you
and your spouse pay estimated taxes jointly, you are not obligated to file a
joint tax return. You can each claim half of the amounts paid or you can
agree on which amounts each will claim as estimated taxes paid. If you
cannot agree on the amounts then that is when you run into trouble and would
probably have to seek arbitration.
If you are married, but qualify to file as Head of
Household under the rules for married taxpayers living apart and live in
a state that has community property laws, your earned income for the EIC,
includes the entire amount you earned. This is so even if part of it is
treated as belonging to your spouse under your state's community property
laws.
In some states a husband and wife may enter into an
agreement that affects the status of property or income as community or
separate income. Needless to say, it is preferable that this agreement
be in writing.
If you are a United States citizen or resident alien and
you choose to treat your nonresident alien spouse as a U.S. resident for
tax purposes and you are domiciled in a community property state or
country, use the community property rules and you must file a joint tax
return for the year in which you make the choice.
Treat earned income that is not trade or business or
partnership income as the income of the spouse who performed the
services to earn the income. Earned income does not include amounts paid
by a corporation that are a distribution of earnings and profits.
Community property laws may not apply to an item of
community income that you receive but did not treat as community income.
You are responsible for reporting all of that income item if you treat
the item as if only you are entitled to the income and if you don't notify
your spouse of the nature and the amount of the income by the due date for
filing the tax return.
