CA Resident with non-resident spouse

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated) 

Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date CA Resident with non-resident spouse sfmead78 03-03-2008  Re: CA Resident with non-resident spouse Katie 03-03-2008  Re: CA Resident with non-resident spouse removeps-groups@yahoo.com 03-03-2008  Re: CA Resident with non-resident spouse Katie 03-03-2008  Re: CA Resident with non-resident spouse D. Stussy 03-04-2008
Posted by sfmead78 on March 3, 2008, 1:09 pm Please log in for more thread options Hello, I'm a California resident for tax purposes, and have California income to report. I got married in 2007 to a Washington, DC resident who had only DC income and no California income. She was physically in California for about 3 months at the end of last year. We are filing our federal taxes as "Married filing jointly." My questions are: 1. For my California state taxes, should I file as "Married filing jointly" and just report my own income (since my wife had no California income)? 2. Do I use the resident or non-resident state form? I would imagine resident, since all the income was earned by myself and not my spouse. 3. Same as 1 and 2, except regarding my wife's filing for DC. If you can answer any of the questions above please let me know. Thanks! -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Katie on March 3, 2008, 2:06 pm Please log in for more thread options > Hello, > > I'm a California resident for tax purposes, and have California income > to report. I got married in 2007 to a Washington, DC resident who had > only DC income and no California income. She was physically in > California for about 3 months at the end of last year. We are filing > our federal taxes as "Married filing jointly." > > My questions are: > > 1. For my California state taxes, should I file as "Married filing > jointly" and just report my own income (since my wife had no > California income)? > > 2. Do I use the resident or non-resident state form? I would imagine > resident, since all the income was earned by myself and not my spouse. > > 3. Same as 1 and 2, except regarding my wife's filing for DC. > > If you can answer any of the questions above please let me know. > Thanks! The answers to your questions depend on some facts you have not supplied. Did your wife move to California to live with you before the end of 2007, or was she just visiting here? Is she still in California? Is she still employed in DC? It makes a difference. If she has given up her DC job and living quarters and has moved in with you in California, and did so in 2007, then she was a part-year CA resident in 2007. If she was just visiting and has returned to DC to continue her employment there, then she was a nonresident of CA for the entire year. I'm assuming your domicile in CA and that hers is (or was) DC or some other separate property jurisdiction. As you may know, California is a community property state. The division of income between spouses for tax purposes is governed by the laws of their state of domicile. While spouses who live together generally have the same domicile, it is entirely possible for spouses to have different domiciles. Assuming you are domiciled in California, your earnings are community income (in the absence of a written agreement between you and your wife to the contrary), which means half of your earnings belong to her. If that is the case, then if you file MFJ for federal purposes, you must also file MFJ for California. The only exceptions to the rule that filing status must be the same as federal are if one or both spouses are active duty military, or if one spouse is a full year nonresident and has no California source income. Since your California earnings belong 50% to your wife from the date of your marriage onward, you wife DOES have California source income and you must file MFJ in California. The joint return will be filed on Form 540NR, which is the form provided for nonresidents and part-year residents. On Schedule CA-540NR you will see 5 columns: federal, CA additions, CA subtractions, California amounts (as if both spouses were full-year CA residents), and Col. E, which is California taxable amounts. Col. E will include 100% of your income for the entire year (including your community 1/2 of your earnings after the date of marriage), plus your wife's CA source income for the part of the year when she was a nonresident (including her community 1/2 of your earnings after marriage). It will also include 100% of her income for any part of the year when she was a CA resident. You calculate the average tax rate that would have applied if both of you had been CA residents for the entire year, and prorate that rate by the ratio of California (Col.E) to total (Col. D) taxable income. That is the rate that applies to the Col. E income. Look at the DC form instructions to determine how to file your wife's DC return. I don't have time to look at it now but I'll try to get back to this later to answer any questions you have about DC. Katie in San Diego -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by removeps-groups@yahoo.com on March 3, 2008, 4:44 pm Please log in for more thread options > Col. E > will include 100% of your income for the entire year (including your > community 1/2 of your earnings after the date of marriage), plus your > wife's CA source income for the part of the year when she was a > nonresident (including her community 1/2 of your earnings after > marriage). It will also include 100% of her income for any part of > the year when she was a CA resident. But the above formula can result on people taxed on more than what they make. Consider an example: - CA person makes 100k for all of year - they get married in March/1 - DC person makes 20k for Jan and Feb - DC person makes 130k for Mar to Sep - DC person moves to CA on October/1 - DC person makes 0k in CA So on 540NR for line 7 (Wages) and line 22 (Total Income) and line 37 (AGI): (A) Federal AGI is 250k. (B) 0 in my example (C) 0 in my example (D) same as (A) (E) 100+130/2 = 165k. So CA will tax tax 165k. They actually tax the full 250k then multiply 165k by the ratio of the full CA tax to 250k. The effect of this is to tax the 165k at a higher rate, which seems unfair as CA seems to be piggy-backing on money earned in other states. Now DC will probably tax the entire 150k that the spouse made in DC. The net result is that 165+150=315k of income is taxed at the various state levels. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Katie on March 3, 2008, 8:42 pm Please log in for more thread options On Mar 3, 1:44 pm, "removeps-gro...@yahoo.com" <removeps- gro...@yahoo.com> wrote: > > > Col. E > > will include 100% of your income for the entire year (including your > > community 1/2 of your earnings after the date of marriage), plus your > > wife's CA source income for the part of the year when she was a > > nonresident (including her community 1/2 of your earnings after > > marriage).  It will also include 100% of her income for any part of > > the year when she was a CA resident. > > But the above formula can result on people taxed on more than what > they make.  Consider an example: > > - CA person makes 100k for all of year > - they get married in March/1 > - DC person makes 20k for Jan and Feb > - DC person makes 130k for Mar to Sep > - DC person moves to CA on October/1 > - DC person makes 0k in CA > > So on 540NR for line 7 (Wages) and line 22 (Total Income) and line 37 > (AGI): > (A) Federal AGI is 250k. > (B) 0 in my example > (C) 0 in my example > (D) same as (A) > (E) 100+130/2 = 165k. > > So CA will tax tax 165k.  They actually tax the full 250k then > multiply 165k by the ratio of the full CA tax to 250k.  The effect of > this is to tax the 165k at a higher rate, which seems unfair as CA > seems to be piggy-backing on money earned in other states. > > Now DC will probably tax the entire 150k that the spouse made in DC. > The net result is that 165+150=315k of income is taxed at the various > state levels. > Actually, your example is wrong. California will not tax ANY of the nonresident spouse's income earned before she became a resident. In your example, Col. E would consist of 100% of H's salary for the entire year, or $100K. Period. This is based on the assumption that W, before moving to California, was domiciled in DC or another separate property jurisdiction. She would not acquire a CA domicile until she moved to CA with the intention of remaining permanently or indefinitely -- i.e., not until, in your example, October 1. So none of her income is community income, and none of it is attributable to H. If W had been domiciled in a community property jurisdiction, H's community 1/2 of her earnings would have been included in Col. E, but not her 1/2. They would have received credit on the California return for the tax they paid to the state of her residence on his community 1/2 of her earnings there, thus mitigating the double taxation of that income. It is true that H's $100K of income is taxed at a higher rate than it would have been if W's income were not also included in computing the rate. The rate is calculated as if a nonresident or part-year resident had been a resident for the entire year. Many states that have graduated rate structures use this method. It was approved by the Vermont Supreme Court in the 1960s, IIRC, and has been approved by the high courts in several other states since then. The U.S. Supreme Court has never granted certiorari in such a case. Although it is often referred to nowadays as the "California method," in fact California adopted this method fairly late -- not until 1982. Katie in San Diego -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by D. Stussy on March 4, 2008, 1:09 am Please log in for more thread options > > Hello, > > > > I'm a California resident for tax purposes, and have California income > > to report. I got married in 2007 to a Washington, DC resident who had > > only DC income and no California income. She was physically in > > California for about 3 months at the end of last year. We are filing > > our federal taxes as "Married filing jointly." > > > > My questions are: > > > > 1. For my California state taxes, should I file as "Married filing > > jointly" and just report my own income (since my wife had no > > California income)? > > > > 2. Do I use the resident or non-resident state form? I would imagine > > resident, since all the income was earned by myself and not my spouse. > > > > 3. Same as 1 and 2, except regarding my wife's filing for DC. > > > > If you can answer any of the questions above please let me know. > > Thanks! > > > > The answers to your questions depend on some facts you have not > supplied. > > Did your wife move to California to live with you before the end of > 2007, or was she just visiting here? Is she still in California? Is > she still employed in DC? It makes a difference. If she has given up > her DC job and living quarters and has moved in with you in > California, and did so in 2007, then she was a part-year CA resident > in 2007. If she was just visiting and has returned to DC to continue > her employment there, then she was a nonresident of CA for the entire > year. > > I'm assuming your domicile in CA and that hers is (or was) DC or some > other separate property jurisdiction. As you may know, California is > a community property state. The division of income between spouses > for tax purposes is governed by the laws of their state of domicile. > While spouses who live together generally have the same domicile, it > is entirely possible for spouses to have different domiciles. > Assuming you are domiciled in California, your earnings are community > income (in the absence of a written agreement between you and your > wife to the contrary), which means half of your earnings belong to > her. If that is the case, then if you file MFJ for federal purposes, > you must also file MFJ for California. The only exceptions to the > rule that filing status must be the same as federal are if one or both > spouses are active duty military, or if one spouse is a full year > nonresident and has no California source income. Since your > California earnings belong 50% to your wife from the date of your > marriage onward, you wife DOES have California source income and you > must file MFJ in California. > > The joint return will be filed on Form 540NR, which is the form > provided for nonresidents and part-year residents. On Schedule > CA-540NR you will see 5 columns: federal, CA additions, CA > subtractions, California amounts (as if both spouses were full-year CA > residents), and Col. E, which is California taxable amounts. Col. E > will include 100% of your income for the entire year (including your > community 1/2 of your earnings after the date of marriage), plus your > wife's CA source income for the part of the year when she was a > nonresident (including her community 1/2 of your earnings after > marriage). It will also include 100% of her income for any part of > the year when she was a CA resident. You calculate the average tax > rate that would have applied if both of you had been CA residents for > the entire year, and prorate that rate by the ratio of California > (Col.E) to total (Col. D) taxable income. That is the rate that > applies to the Col. E income. > > Look at the DC form instructions to determine how to file your wife's > DC return. I don't have time to look at it now but I'll try to get > back to this later to answer any questions you have about DC. I would generally agree with this, but there is one other issue: As you got married DURING 2007, have you sufficiently co-mingled your income and assets so as to invoke the community property rules? Although it is generally automatic (by default) due to the way most married couples operate, if you haven't co-mingled any of your assets yet, I'm not certain that "the community" has been formed. (This addresses the non-resident with no-community-income exception mentioned above). If your wife has spent even as much as $1 of money from you or your income, you have co-mingled, and therefore community property rules apply. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted CA resident with part year resident spouse March 15, 2009, 1:47 pm Re: NY Tax for Nonresident October 21, 2006, 6:33 pm Re: NY Tax for Nonresident October 24, 2006, 7:08 am Re: NY Tax for Nonresident October 24, 2006, 7:08 am Re: NY Tax for Nonresident October 24, 2006, 7:08 am Re: NY Tax for Nonresident October 24, 2006, 7:08 am NY IT-203 Nonresident return, correction September 1, 2008, 9:02 pm Illinois resident/non resident and schedule NR April 9, 2007, 2:51 am CA part-year resident alien & TX part-year resident alien couple? February 7, 2007, 7:29 pm Am I a resident? February 12, 2007, 12:04 am