The following discussions are situations where special rules apply to community property.taxmap/pubs/p555-003.htm#TXMP45534053
Community property laws may not apply to an item of community income that you received 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
- You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions).
You are not responsible for the tax relating to an item of community income if all
the following conditions exist.
- You did not file a joint return for the tax year.
- You did not include an item of community income in gross income.
- The item of community income you did not include is one of the following:
- Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee.
- Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor.
- Your spouse's (or former spouse's) distributive share of partnership income.
- Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Use the appropriate community property law to determine what is separate property.
- Any other income that belongs to your spouse (or former spouse) under community property law.
- You establish that you did not know of, and had no reason to know of, that community income.
- Under all facts and circumstances, it would not be fair to include the item of community income in your gross income.
For information on how and when to request relief from liabilities arising from community property laws, see Community Property Laws in Publication 971.taxmap/pubs/p555-003.htm#TXMP350c4f85
If you do not qualify for the relief discussed above and are now liable for an underpayment or understatement of tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief. To request equitable relief, you must file Form 8857, Request for Innocent Spouse Relief, or other similar statement. Also see Publication 971.taxmap/pubs/p555-003.htm#TXMP6e01ca7f
In some states a husband and wife may enter into an agreement that affects the status of property or income as community or separate property. Check your state law to determine how it affects you.taxmap/pubs/p555-003.htm#TXMP4766e4cb
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. You must file a joint return for the year you make the choice. You can file separate returns in later years. For details on making this choice, see Publication 519, U.S. Tax Guide for Aliens.
If you are a U.S. citizen or resident alien and do not choose to treat your nonresident alien spouse as a U.S. resident for tax purposes, treat your community income as explained next under Spouses living apart all year. However, you do not have to meet the four conditions discussed there. taxmap/pubs/p555-003.htm#TXMP78a46db0
If you are married at any time during the calendar year, special rules apply for reporting certain community income. You must meet all
the following conditions for these special rules to apply.
- You and your spouse lived apart all year.
- You and your spouse did not file a joint return for a tax year beginning or ending in the calendar year.
- You and/or your spouse had earned income for the calendar year that is community income.
- You and your spouse have not transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value.
If all these conditions are met, you and your spouse must report your community income as discussed next. See also Certain community income not treated as community income by one spouse,
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 is wages, salaries, professional fees, and other pay for personal services.
Earned income does not include amounts paid by a corporation that are a distribution of earnings and profits rather than a reasonable allowance for personal services rendered.taxmap/pubs/p555-003.htm#TXMP11ccec03
Treat income and related deductions from a trade or business that is not a partnership as those of the spouse carrying on the trade or business.taxmap/pubs/p555-003.htm#TXMP2b7ff066
Treat income or loss from a trade or business carried on by a partnership as the income or loss of the spouse who is the partner. taxmap/pubs/p555-003.htm#TXMP39db8101
Treat income from the separate property of one spouse as the income of that spouse. taxmap/pubs/p555-003.htm#TXMP2e44ccb9
Treat social security and equivalent railroad retirement benefits as the income of the spouse who receives the benefits. taxmap/pubs/p555-003.htm#TXMP3bbce564
Treat all other community income, such as dividends, interest, rents, royalties, or gains, as provided under your state's community property law. taxmap/pubs/p555-003.htm#TXMP6399e075
George and Sharon were married throughout the year but did not live together at any time during the year. Both domiciles were in a community property state. They did not file a joint return or transfer any of their earned income between themselves. During the year their incomes were as follows:
|Consulting business||5,000|| |
|Dividends from separate property||1,000||2,000|
|Interest from community property||500||500|
Under the community property law of their state, all the income is considered community income. (Some states treat income from separate property as separate income—check your state law.) Sharon did not take part in George's consulting business.
Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). But because they meet the four conditions listed earlier under Spouses living apart all year, they must disregard community property law in reporting all their income (except the interest income) from community property. They each report on their returns only their own earnings and other income, and their share of the interest income from community property. George reports $26,500 and Sharon reports $34,500.taxmap/pubs/p555-003.htm#TXMP2068b255
If you and your spouse are separated but do not meet the four conditions discussed earlier under Spouses living apart all year, you must treat your income according to the laws of your state. In some states, income earned after separation but before a decree of divorce continues to be community income. In other states it is separate income.