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Married Filling Separately - Community Property Income???

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I live in California, spouse lives overseas. She earned all her income overseas and no US income. How do i deal with community property income when filing married separately? Do i need to report her income, make adjustment, etc?

Or should I file extension to get her original passport so I can file married jointly with W7?

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Filed: Country: Vietnam (no flag)
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You do not include her income when you file married filing separately.

The general rule is that your income is your income and her income is her income. Community property laws do not affect this. The income is taxed solely to the earner.

Community property is state law. It affects property rights between a husband and spouse but is irrelevant for reporting earned income on tax returns.

File jointly only if it gets you a lower tax bill versus filing separately on your own. Otherwise you're volunteering to pay extra US taxes on your wife's earnings. There's no reason to volunteer to pay more taxes when you don't legally have to.

Edited by aaron2020

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You do not include her income when you file married filing separately.

The general rule is that your income is your income and her income is her income. Community property laws do not affect this. The income is taxed solely to the earner.

Community property is state law. It affects property rights between a husband and spouse but is irrelevant for reporting earned income on tax returns.

File jointly only if it gets you a lower tax bill versus filing separately on your own. Otherwise you're volunteering to pay extra US taxes on your wife's earnings. There's no reason to volunteer to pay more taxes when you don't legally have to.

you are right as this only applies to state taxes. So what do i put in the worksheet? do i just leave it blank? According to turbotax, I will get more refund if i file married jointly. But I need to file extension to do this since I have not prepared W7 form yet for her to get ITIN. If I do file jointly in which I need to apply ITIN through W7, I just have concern of sending the original passport. Do I just need to show it to IRS officer or do they take the original for filing w7? I'm afraid it might get lost and she won't have her passport in case of traveling.

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Filed: Country: Vietnam (no flag)
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Here's another fun fact about community property. It is state law, so it only affects property in the state and people in the state.

Neither your wife or her property was earned in the state, so her stuff is not community property.

You on the other hand live in a community property state. Your earnings come from a community property state. Your stuff is community property based on state law and your marriage.

Only a handful of states have community property laws; about 10 of the 50 states. California is a big one.

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Filed: Country: Vietnam (no flag)
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you are right as this only applies to state taxes. So what do i put in the worksheet? do i just leave it blank? Leave what? Please clarify. According to turbotax, I will get more refund if i file married jointly. But I need to file extension to do this since I have not prepared W7 form yet for her to get ITIN. If I do file jointly in which I need to apply ITIN through W7, I just have concern of sending the original passport. Do I just need to show it to IRS officer or do they take the original for filing w7? I'm afraid it might get lost and she won't have her passport in case of traveling.

No. Your wife is not a resident of your community property state nor was her income earned in your community property, so her income is not community property. You being a resident of the state does not give you any community property rights to her income. She is not required to file a US tax return or a state tax return.

Turbotax is good for most people. However, Turbotax was not programed well for situations where one spouse is a US resident and the other spouse is a foreign resident. There is no way a $50 program can handle a rare situation like yours well.

For married filing jointly where you get a bigger refund, did you include your wife's income after applying the Foreign Earned Income Exclusion (FEIE) and including all her unearned income?

Whether filing with your wife jointly and subjecting her income to US taxation to get a lower tax liability (or larger refund) depends on how much your wife earned and the FEIE and full taxation on her unearned income. You need to run the numbers (married filing separately on your income vs. married filing jointly with both your and her incomes) to figure it out since everyone's situation is different.

Your wife's passport is not required to obtain an ITIN. You can submit a certified or notarized copy. She can keep her original passport.

Edited by aaron2020

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