WI divorce in 2010 help!

[HV Ken]

Hi,

I am helping a close friend who lives in WI (I live in NY) that got divorced 10/14/2010. I am not familiar with how a community property state works, as none of the states where I live are classified this way.

His Federal return is Single with 2 dependents that his ex released via 8332. He has a six figure income and was the primary bread winner in the marriage.

I am reading through Pub 109, and am seeing things like:

* Divorced taxpayers. You are still jointly and individually responsible for any tax, interest, penalties, and fees due on a joint return filed before your divorce.

* Divorced spouses. An absolute decree of divorce ends the marital community. When the marital community is ended, the marital property assets are divided between the spouses. Any income earned after the marriage ends is taxable only to the spouse to whom it belongs. However, each spouse is generally taxed on half of the marital property income for the part of the year before the marital community ends.

and realize I could use some help filing this WI return out properly. ATX created the "WI 1" return as Single and doesn't appear to be taking any of this community property stuff into consideration???

Would any WI (or other community property state) preparers be willing to give me some guidance? If it is easier over the phone, you could private message me your number and when I can call. Thanks!

[HV Ken]

So it looks to me that he adds in half her income up to the date of divorce and subtracts half his income up to the date of the divorce.

Do I just place those figures on:

Line 4 - Other Additions, item 29 Differences in Federal and Wisconsin Reporting of Marital Property (Community) Income

and

Line 11 - Other Subtrations, item 32 Differences in Federal and Wisconsin Reporting of Marital Property (Community) Income

??

Also, he paid ALL the mortgage interest and real estate taxes for the entire year, and she lives in the house. Does he still get the entire amount on his return, or is this also reduced by half up to the time of divorce, etc.?

Thanks!

[mcb39]

Personally, I have never seen the "splitting of income" done for several years. Generally they agree at the time of divorce to each file their own. While looking through my Wisconsin Tax Guide for you, I come across the following tip: TIP: Since the splitting of income and deductions can be quite complex and time-consuming, it may be beneficial for spouses filing separately "not to notify" each other.

According to what I have been reading, the splitting of income in a marital property state starts at the Federal level and carries over to the state return. I just have not seen one of those worksheets for years, as I said.

The fact that she released the dependent exemptions to him indicates to me that her intent is to file her own and he is to file his own. Much simpler that way. Perhaps someone else from "any" community property state would like to chime in here.

[HV Ken]

Thanks Marilyn,

Her CPA e-mailed my client the following:

Your preparer may be interested to know that you are not required to report any of [her] income if she does not disclose it to you. That is an exception to Wisconsin’s marital property laws.

I don't see that exception in the pubs I've been reading, but I agree just keeping it all separate makes things easier. But if that's the case, what's the point of a community property state???

[mcb39]

All of their community property issues would have been settled in court at the time of the divorce.

[jainen]

>>I don't see that exception in the pubs I've been reading<<

Did you try the pub called, "Community Property" at Pub 555? It has a whole section on Community Property Laws Disregarded. Wisconsin doesn't follow that completely, however. It uses a more comprehensive rule similar to the innocent spouse laws, including the concept of "had no reason to know." See Wisconsin Pub 113 for details.

California has such complicated income tax laws that we have to take extra CPE to cover it. But we also have a whole set of reference books available so in some ways it is easier to research. You can't just use our rules about community property, though, because every state is different. For example, California allows spouses to keep income from their own separate property; Wisconsin makes them share. California says the marital community ends whenever the spouses decide; Wisconsin makes them wait for the judge's decision (or at least the next tax year).