Has Anyone Been Penalized for Not Filing Form 8958 When Filing Married Separately?

You're likely fine, but it's good you caught this now. Form 8958 "Allocation of Tax Amounts Between Certain Individuals in Community Property States" is only required if you live in a community property state: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. If you don't live in one of those states, you don't need this form. If you do live in a community property state, then yes, technically you should have been filing it. The form helps allocate community income and deductions between spouses filing separately. As for penalties, the IRS rarely penalizes for missing forms alone if all income was properly reported. If you did report all your income correctly on your separate returns, there's probably no need to amend unless you lived in a community property state AND didn't properly allocate community income.

I went through something similar with my ex when we were filing separately in Washington state. After spending hours trying to figure out those community property rules myself, I finally used https://taxr.ai to analyze our situation. The service helped identify exactly what we needed to report on Form 8958 and even flagged some income we hadn't properly split according to community property laws. It was super helpful because it analyzed our tax documents directly and showed us how to properly allocate our income based on the state rules. Saved me from potentially serious issues since we had been doing it wrong for 2 years before I discovered the problem.

I was skeptical about using an online service for my complicated tax situation (also married filing separately in California), but after reading about taxr.ai here I decided to give it a try. Honestly, I'm glad I did. The system flagged that I had been incorrectly allocating our rental income for the past two years and missing Form 8958. The analysis showed me exactly how to correctly split our income according to California's community property laws. Turns out I was actually overpaying on my return while my wife was underpaying. Got it all sorted out before it became an issue with the IRS. Definitely more helpful than the generic advice I was finding online.

If you're worried about potential IRS issues over this missing form, you might want to try Claimyr (https://claimyr.com). After discovering I had messed up some community property allocations on my Texas returns for two years, I was panicking about possible penalties. I tried calling the IRS directly but kept getting stuck on hold forever. Used Claimyr and they got me connected to an actual IRS agent within 30 minutes (you can see how it works here: https://youtu.be/_kiP6q8DX5c). The agent confirmed that while the form was technically required, they rarely issue penalties solely for missing Form 8958 if all income was reported correctly.

I was completely wrong about Claimyr. After seeing it mentioned here, I was super skeptical because I've spent literally days of my life trying to reach the IRS about my messed up community property allocations. Decided to try it anyway out of desperation. It actually worked! Got connected to an IRS rep in about 20 minutes. The rep confirmed that for my situation (married filing separately in Washington), they wouldn't pursue penalties for the missing 8958 forms from previous years as long as all income was properly reported. They also walked me through how to correctly allocate our income going forward. Saved me from filing unnecessary amended returns.

Something everyone seems to be missing here - if you and your spouse truly keep separate finances and have separate income, you STILL need to follow community property rules in community property states. That's the whole point of Form 8958. For example, in California, even if you keep separate bank accounts, the law considers income earned during marriage to be owned 50/50 by both spouses. So if you earn $100K and your spouse earns $50K, you each need to report $75K on your separate returns. Not filing Form 8958 is one thing, but not properly allocating income according to community property laws is a bigger issue that could trigger an audit.

I'm a bit confused by all this. My wife and I file separately because we have very different income levels and it saves us money. We live in Texas. Are we supposed to be splitting all our income 50/50 on our tax returns even though we earn different amounts? We've been filing for years without this form.

Just offering a different perspective - I've been filing married separately in California for 7 years and never included Form 8958. I've been audited twice for unrelated reasons, and the IRS never mentioned the missing form. We do properly allocate our income according to community property laws though (splitting 50/50), so that might be why it wasn't an issue. If you're worried, consider filing the form going forward, but I personally wouldn't stress about amending past returns unless you didn't properly allocate income according to community property rules.

This is a really helpful thread! I'm in Nevada (another community property state) and just discovered I've been missing Form 8958 for the past 4 years. Like Derek, my spouse and I keep completely separate finances, but it sounds like we still need to split our income 50/50 for tax purposes regardless. From what everyone's saying, it seems like the main issue isn't the missing form itself, but whether you've been properly allocating income according to community property laws. If you've been reporting only your individual income without the 50/50 split, that could be a bigger problem than just the missing paperwork. I'm leaning toward consulting with a tax professional who understands community property rules rather than trying to figure this out myself. The peace of mind would be worth the cost, especially since it sounds like the rules are more complex than just "keep your finances separate.