Split income for domestic partners
According to IRS Publication 555, domestic partners in community property states need to split income 50/50 when filing their single filing returns with the IRS. You need to report income according to community property rules for residents of the states of Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. Even if the resident state doesn't have an income tax return, you need to attach the community property state allocation reconciliation worksheet to the federal return. You also need to complete the
ComPSt
screen in the General
folder.important
Community property state allocation needs 1 of the following states for the allocation worksheet to calculate: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin).
- Create a new joint client with the registered domestic partner, or proforma the registered domestic partner (RDP) joint client from a previous year. You can also create a merged client from 2 single-file returns.
- Open the domestic partner return and enter data for both taxpayers using the current-year tax information. Select theT,S,Jcode to assign income, income activities, and deductions to the taxpayers. UltraTax CS will split the income equally between each taxpayer if codedJ.
- Identify community or non-community (that is, separate) items, and select the code for theCommunity property designationfields for units entered on the following screens:W-2(wages),C(business),W2G(gambling winnings),F(farm),4835(farm rental),K1(Schedule K-1,1065/1120S), andRent(rent and royalty property).
- Open the state return to generate the necessary domestic partner return for state purposes.
- SelectUtilities,Filing Status Optimization, then theCommunity Property and Othertab, and mark theSplit income according to Community Property rulescheckbox.
- Select a filing status from the Taxpayer and Spouse dropdown lists.
- Mark theSave clients upon exitcheckbox, then selectDone.
- When the filing status optimization process is complete, the RDP's tax data transfers to theComPStscreen in theGeneralfolder. UltraTax CS automatically produces the Community Property State Allocation Worksheet (located in the CPAlloc folder) in each taxpayer's return using the information from the joint return.
- After reviewing all return information, you can generate individual federal tax returns from the files you created using Filing Status Optimization. You can generate the state return from the domestic partner client.
