I have a client who hasn’t lived with his wife for at least 5 years. He moved to CA in 2015. She has NEVER lived in CA or set-foot in CA. She lives and works in NY for the UN. They have no plans on divorcing any time soon. They live total separate lives, including financial.
Do I still have to complete form 8959? the taxpayer has for years reports 100% of his income on his return. Can I over-ride the form to allocate 100% of his wages, etc. to him only?
Take a look at IRC Sec. 66. Not sure it applies here. Here’s the big problem. If they have no separate property agreement, 1/2 of his income is taxable to and belongs to her as his income is community property. If they do divorce or he dies, she could have a claim to 1/2 of his property acquired during the marriage or before but maintained with his community funds. I’d look at Sec. 66 and even if it applies, they should get a post nuptial agreement.