State tax on non-resident spouse

Alaska has no state income tax. I think they can file a joint federal return and the MN spouse files an separate return. Dunno if MN would consider that single or MFS.

So MN lets them file separate state returns if they file a joint federal return? Or can they simply not claim the husband's non-MN income on a joint state return?

I have no knowledge of MN taxation. But what I've seen in similar situations (involving other states) is that they would file a NON-resident JOINT return in MN, and it would only report the MN income (as per your last sentence above). YMMV.

This isn't correct. MN requires you to file using the same status as on the federal return. As long as either spouse is a resident of MN, a MN RESIDENT return must be filed. If MFJ, both spouses income will be reported to and taxed by MN. A credit ($0) will be given for taxes paid to AK on the AK-source income. If MFS, only the MN income will be reported to and taxed by MN. You need to look at the overall federal + state taxes to determine whether MFJ or MFS is the better way to file.

Ira Smilovitz, EA Leonia, NJ

Thanks Mike, that makes sense. My recollection is that some states (I'm in CA and I think it's the rule here) that if you file a joint return federally, you have to file one for the state as well. So I was a bit confused by this situation. I'll tell them to talk to a tax pro in MN.

Unless something has changed recently in Minnesota "You must use the same filing status on your state income tax return as on your federal return"

The following is a grossly simplified version of how I've seen this process work in the past with friends here in Minnesota. This is not advice from a competent tax professional. You may want to seek advice from a competent professional in MN taxes.

Process: The Federal Tax return needs to be completed first.

Then fill out form M1 (2020 Form M1, Individual Income Tax) up thru line

1. The tentative tax on line 12 is the MN tax that would be due if both spouses were full year MN residents.

Now fill out form M1NR (2020 Schedule M1NR, Nonresidents/Part-Year Residents). List both spouses but check the Full-year nonresident box only for the nonresident spouse. On the rest of form M1NR you determine the "Minnesota portion" of all the various types of income that were reported on the Federal tax return. This where you exclude non-Minnesota income. When you get down to line 30 you have a ratio of MN income/Total income. Line 31 is the tentative tax from Form M1 line

Notes:

- I suggest generating both MFJ and MFS Federal and Minnesota returns and seeing which results in the lower total tax. Assuming one filing status is best is quite often wrong.

- MN has the presumption that the spouse of a full time resident is also a full time resident. Don't be surprised if MN asks for proof that the nonresident spouse actually qualifies as a nonresident.

- MN consider a person a resident if they meet the 183 day rule (You spend at least 183 days in Minnesota during the year) OR the Domicile rule. The domicile rule is complicated and it trips up a surprising number of people who ever lived in Minnesota.

Generally that's true for CA, but it's complicated. From the 2019 instructions for form 540:

======= Begin extract Use the same filing status for California that you used for your federal income tax return, unless you are a registered domestic partnership (RDP) . If you are an RDP and file single for federal, you must file married/RDP filing jointly or married/RDP filing separately for California.

If you are an RDP and file head of household for federal purposes, you may file head of household for California purposes only if you meet the requirements to be considered unmarried or considered not in a domestic partnership.

Exception: If you file a joint tax return for federal purposes, you may file separately for California if either spouse was either of the following: ? An active member of the United States armed forces or any auxiliary military branch during 2019. ? A nonresident for the entire year and had no income from California sources during 2019. ======= End extract

As I read that, if the OP's scenario was CA-AK and not MN-AK, the AK spouse was a nonresident for the entire year. Assuming s/he had no CA income, the CA spouse could file CA taxes as married/RDP filing separately.

I concur with IRA.

You do need to watch out for the community property rules. If the CA nonresident happens to reside in a CP state, then the community income is shared on separate returns. It turns out that AK is an Opt In or Opt Out of CP state.

Just to make sure I fully understand, when they file MFJ, the non- resident spouse's income earned outside MN must also be included in taxable income and taxed in MN. I suppose courts would approve that as long as they have the option to not include the husband's out of state income by filing separately.

You understand correctly.

Ira Smilovitz, EA Leonia, NJ

My chiropractor will be pleased. :-)