My wife received a notice from the IRS indicating they contest the amount specified on line 64 ("Federal income tax withheld from Forms W-2 and 1099") of her 1040. I'm trying to determine if we need to split the community adjustment out to a separate line.
We live in a community property state and file separately. We both submitted form 8958 (
"Allocation of Tax Amounts Between Certain Individuals in Community Property States") with our 1040s to indicate the split of income and withholdings between the two of us.
We both filed via Turbotax, and Turbotax calculated our withholding (1040 line 64) as the adjusted withholding after accounting for community property split. In other words:
- her W-2 indicates that she had X withheld
- my W-2 indicates I had Y withheld
- her 1040 line 64 indicates (X + Y)/2
- my 1040 line 64 indicates (X + Y)/2
I have a feeling the IRS contests this because turbotax should have included her original withholdings (X) on line 64, and then shown the adjustment ((X + Y)/2 - X) per form 8958 on line 73 (
"Credits from form: (d) other"). However, I cannot find any published guideline on how/where to include the adjustments from the 8958 on one's 1040. Neither the instructions for that form nor Publication 555 indicate which 1040 lines should reflect the income and withholding adjustments, or if they should be considered as part of the baseline earnings and withholding.
Strangely, turbotax did split the original income and community property adjustments on our 1040s across lines 7 (
"Wages, salaries, tips, etc.") and 21 (
"Other income"), respectively, but produced a post-adjustment value for withholdings.
Is there guidance on how to account for community propery withholdings properly on the 1040? This is for the 2015 tax year.