Using the Filing Status Optimization utility (1040)

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MFA required for electronic filing

Effective May 3rd, the 2017 version of UltraTax CS requires multi-factor authentication (MFA) to access the electronic filing transmission feature in CS Connect.

Thomson Reuters is committed to proactively evolving our security features to help you protect your firm and your clients' data. For more information about multi-factor authentication, see Multi-factor authentication overview.


Use the following procedure to assess whether it is more beneficial for your married clients to file jointly or separately using the Filing Status Optimization utility in UltraTax/1040. After UltraTax CS calculates taxpayer and spouse data, it provides you with a report that allows you to quickly identify the optimal filing status.

The Filing Status Optimization utility is a valuable tool designed to help you determine which filing status is most advantageous for your married clients.

The Filing Status Optimization utility provides:

The Filing Status Optimization utility is particularly useful when:

Using the Filing Status Optimization utility

  1. Complete the return with the filing status of married filing joint (MFJ) specified in Screen 1040. As you enter data, properly identify all income, expense, credit, and other items as belonging to the taxpayer or spouse using the T, S, J fields or the Taxpayer and Spouse columns where provided. Items identified as J are split equally between the taxpayer and the spouse. If you leave the T, S, J fields blank, UltraTax CS allocates the amount to the taxpayer.

    For dependents entered in the Dependent information statement dialog in Screen 1040, dependents coded J are optimized and assigned to the taxpayer or the spouse based on which scenario generates the greatest tax savings for a married filing separate status. Dependents coded T (or blank) will always be assigned to the taxpayer and dependents coded S will always be assigned to the spouse. When dependents coded J are present in the return, the filing status optimization process will take longer to complete.

    Note: In some situations, if the TSJ code is not present, the optimization utility cannot accurately determine whether the taxpayer or the spouse is the "owner" of certain amounts or whether they both share equal ownership. Under these circumstances, UltraTax CS makes the following assumptions in allocating amounts. (Based on these defaults, you may need to modify related amounts on the separate returns.)

    Input screen Default
    1310, 2Yr4835, 2Yr, 2YrC, 2YrRent, 2YrF, 4562, 8379, 8453, 8615, 8615Sib, 8689, 8822, 8822B, 8840, 8857, 8857-2, 8857-3, 8862, 8918, 9465, Amend, ComPSt, DualStat, ELF, ESign, FAFSA, Family, History, NRA, NRA-2, PIN, POA, POA-2, PRR, RAL, TermStmt, TPW, TPW-2, TPW-Comp, TPW-ACA, W7 Amounts entered in these input screens do not transfer to either the taxpayer's or spouse's return.
    1045, 1045-2, 1045-3, 1045-4, 4136, 4136-2, 4136-3, 5074, 8697, 8801, 8938, 8938-2, 982, AMT, J All amounts are allocated to the taxpayer only.
    8814 All information not specifically allocated to the spouse is allocated to the taxpayer only.
    8839 Amounts not entered in the Eligible Children Information statement dialog are allocated to the taxpayer only.
    8867 All information is transferred to both the taxpayer and spouse.
    Asset module All depreciable assets that are selected for Schedule A are allocated to the taxpayer only. All depreciation entered for all other business activity categories is allocated based on the TSJ codes entered for a corresponding business activity form and unit number. Basis, prior depreciation, and current depreciation of joint assets are split equally.
    ACA Tax Amounts entered in the Form 8960 - Net Investment Tax section will not transfer to the taxpayer or spouse's return.
    Cr Amounts entered in the Child Tax Credit section are split equally between the taxpayer and spouse. The full amounts entered in the Provider information and Qualifying person information for nondependents statement dialogs are allocated to both the taxpayer and the spouse.
    Cr-2 All amounts for Forms 8582-CR are allocated to the taxpayer only.
    Educate The amounts in the 8815 section for Series EE or I Bonds not entered in statement dialogs are split equally between the taxpayer and spouse.
    EIC Amounts entered in the Pension or annuity from nonqual plan or sec 457 plan included in wages, Adjustment to earned income, and Disqualifying investment income (Force) fields are split equally between the taxpayer and spouse. All other information entered in the Earned Income Credit section is transferred to both the taxpayer and spouse.
    Est

    The following fields from the sections listed below do not transfer from this screen to Screen Est for either the taxpayer's or the spouse's return:

    2017 Federal Payments section

    • Amount paid with 1040-V (Force)
    • Former spouse SSN, if joint estimates
    • Explanation of division of joint estimates

    2017 Overpayment Application section

    • Amount for code #5

    2018 Estimates - Calculated section

    • Withholding adjustment
    • Amount for code #2
    • Amounts for code #5 or #9
    • 2018 Estimates paid
    • Adjusted gross income
    • Other tax / credit adj
    • Amount of refund desired
    • IRS check digits from pre-printed label

    Name Change - Estimates

    • Print name on 2018 1040-ES vouchers
    Ext

    The following amounts from the section listed below do not transfer from this screen to Screen Ext for either the taxpayer's or the spouse's return:

    Extension Information

    • Balance due on extension (force)
    4952, OthAsset All amounts are split equally between the taxpayer and spouse.
    Pen Amounts from Schedule AI do not transfer to either the taxpayer's or to the spouse's return.
    PTC Information in the Shared Policy Allocation statement is allocated based on the TS column. Amounts entered in all other fields do not transfer to either the taxpayer's or the spouse's return.
  2. After completing the joint return, open the Filing Status Optimization utility by choosing Utilities > Filing Status Optimization.

    Note: When you open this utility, UltraTax CS automatically generates two unique client IDs, one with an ID that ends with TP for the taxpayer and one with an ID that ends with SP for the spouse. The client ID information for the two separate clients appears at the top of the Filing Status Optimization dialog.

  3. If the joint return is itemized, the separate returns are itemized by default. If the joint return uses the standard deduction, the separate returns use the standard deduction by default. However, you can force the separate returns to be itemized or to use the standard deduction by choosing Standard or Itemized from the Taxpayer field.
  4. You can force the state/local income or sales tax deduction method for the separate clients by choosing Income, Sales - Table, or Sales - Actual from the respective Taxpayer and Spouse fields. By default, the Taxpayer and Spouse fields will use the state/local income or sales tax deduction method entered in the Joint field.
  5. You can force the state/local tax refunds on the separate returns by marking the Force state/local tax refunds checkbox in the General tab of the Filing Status Optimization dialog and entering the desired amount in the Taxpayer and Spouse fields.
  6. You can allocate the maximum dollar limitation for section 179 between the taxpayer and spouse using the Sec. 179 dollar limitation percentage field. The default is to give 50 percent of the limitation to the taxpayer and 50 percent to the spouse. When you change the amount in the Taxpayer column and then click the corresponding Spouse column, UltraTax CS automatically calculates the difference between the Joint column and the Taxpayer column and enters the difference in the Spouse column. Note that changing the percentage here will not cause any assets to be moved in the separate clients.
  7. To select next year's organizer delivery method for the separate taxpayer and spouse clients being saved upon exit, choose Paper, Email PDF, PDF to File, Web, Web-Print only, or None from the corresponding Taxpayer and Spouse fields. By default, the Taxpayer and Spouse fields will use the organizer delivery method entered in the Joint field.
  8. You can force the Form 2441 earned income exclusion for the spouses on the separate returns by entering the desired amount in the Spouse earned income for 2441 exclusion fields in the General tab of the Filing Status Optimization dialog.
  9. To split the married filing joint return using community property rules, mark the Split income according to Community Property rules checkbox on the Community Prop / Filing Status / Other tab of the Filing Status Optimization dialog.

    Notes

    • This option is only enabled when the attached state return, or state postal code indicated on Screen 1040, is AZ, CA, ID, LA, NM, NV, TX, WA or WI.
    • The following screens in UltraTax/1040 can be identified as community property: W2 (Wages), W2G (Gambling Winnings), C (Profit or Loss From Business), F (Farm), Rent (Rent and Royalty Property), 4835 (Farm Rental), and K-1 (Schedule K-1, 1065/1120S). Use the Community property designation fields on the aforementioned screens to identify which items are community property or non-community property (i.e. separate property).
    • UltraTax/1040 screens not mentioned in the list above will split items based on the respective T,S,J fields or the Taxpayer and Spouse columns where provided. If you leave the T,S,J fields blank, UltraTax CS allocates the amount to the taxpayer.
    • After the community property items are identified and the separate clients are created via the utility, UltraTax/1040 will automatically complete Screen ComPSt in the General folder using the spouse's (or domestic partner's) tax information. UltraTax CS uses information from this screen, combined with calculated tax return information for the taxpayer, to complete the Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States.
  10. You can select the applicable filing status for the taxpayer and spouse by choosing Married Filing Separate, Single, or Head of Household from the corresponding Taxpayer and Spouse fields on the Community Prop / Filing Status / Other tab of the Filing Status Optimization dialog.

    Notes

    • The default filing status for all returns completed via the Filing Status Optimization utility is married filing separate.
    • Only those individuals who qualify to file as unmarried may choose a filing status other than married filing separate. UltraTax CS does not automatically assess whether the qualifications are met. For more information, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.
    • The Filing Status Optimization Report will be calculated using the specified filing status. In addition, the filing status savings information, which is printed at the bottom of the FSO Summary & FSO Report and also included with the informational diagnostics, will reflect the designated filing status.
  11. If estimated payments entered in Screen Est or StPmt, carryover amounts entered in Screens CO, NOLCO, and COGBCr, or farm loss amounts entered in Screen FarmLoss for the joint return, do not apply to the taxpayer, you can allocate the amounts between the taxpayer and spouse. Use the Payments, 5Yr, NOL & Other Carryovers, Indefinite Carryovers, Business Credit Carryovers, and Excess Farm Loss tabs on the Filing Status Optimization dialog to allocate the amounts between the taxpayer and spouse. When you change any amount in the Taxpayer column and then click the corresponding Spouse column, UltraTax CS automatically calculates the difference between the Joint column and the Taxpayer column and enters the difference in the Spouse column.
  12. Click the Preview button to view the Filing Status Optimization Summary on the screen. Then, click the Print All button to print the report.

    Notes

    • The Filing Status Optimization Report provides state information. For details about filing status optimization for a specific state, press F1 from within any state input screen to open the input screen overview topic, click the "Processing 1040 [state] returns" link at the top of the input screen overview (you may need to scroll to the top of the topic to see the link), click the "User Tips" link, and then click the "Filing Status Optimization" link. Note that if a "Filing Status Optimization" link is not present, then filing status optimization is not applicable for that particular state.
    • The Summary report precedes the Federal report and applicable State report(s).
    • You can print the Filing Status Optimization Report to FileCabinet CS if you are licensed for FileCabinet CS and have it installed. From the Filing Status Optimization dialog, click the Print button to open the Print dialog, mark the Store image in FileCabinet CS checkbox, then click either the Print button or the To Cabinet button. (The To Cabinet button appears when the FileCabinet CS checkbox is marked and the Printer checkbox is not marked.)
  13. If after evaluating the Filing Status Optimization Summary you decide that it is best for the clients to file separately, you can use the separate clients that UltraTax CS automatically created to prepare the returns. To save the spouse and taxpayer clients, mark the Save clients upon exit checkbox and click Run. To open one of the separate clients, click the Family button at the top-right, highlight one of the separate clients, and then click the Open button.

Notes

  • The maximum Roth contributions calculate on the Roth IRA worksheet. The AGI limitations are different for the married filing separate filing status. If the amount of allowable Roth contributions has changed in the taxpayer or spouse clients, a diagnostic displays, but the detailed Filing Status Optimization report does not indicate this change. You will need to evaluate the effect of changes in allowable contributions before deciding the most advantageous filing status.
  • The Filing Status Optimization utility does not split UltraTax/1040 Client Organizer data. Organizer data entry is not available on the newly created, separate clients.
  • Note that you can rename the client IDs using File > Rename. See Renaming a client's ID for details.

Tips

  • You may find that you need to modify the taxpayer or spouse data on the joint return to ensure a correct MFS tax calculation. For example, you may need to reallocate itemized deductions using the T, S, J fields in Screen A. After modifying the data on the joint return, you can run the Filing Status Optimization utility again to see if your modifications change the results of the return, which may in turn affect your decision to file MFJ or MFS.
  • If you are certain that you want to file separate returns for the taxpayer and spouse, you do not need to preview or print the Filing Status Optimization Summary. Instead, mark the Save clients upon exit checkbox and then click Run.

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