Tax questions

March 05, 2000

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

My ex-wife and I were divorced in 1999. For 1998 we filed jointly and itemized deductions. For 1998 we received a state refund. In filing our 1999 individual returns, can we split that refund or must we allocate it based on our relative taxable incomes in 1999?

You should allocate it based on your relative 1998 Maryland taxable income. Now this exercise isn't rocket science, but I'd get out a paper and pencil. Unless there is clear and convincing evidence to allocate the refund in a different manner, IRS would like you to allocate the refund based on what they call the "Separate Tax Formula." This formula basically has both you and your wife refigure your 1998 state tax as if you filed separately. Once this is determined, you each calculate the percentage of your separate Maryland tax liability with respect to the total separate Maryland liability. It's this percentage that is used to allocate any Maryland estimated payments made for 1998 and the actual joint Maryland liability from 1998. Finally, the refund allocated to you would be calculated as follows: allocated joint Maryland liability, less allocated Maryland estimated payments, less your actual withholding. Also, if the refund was issued in your name and Social Security number, you may want to write "Remainder to Spouse" and the total refund in the space between Lines 9 and 10 on your 1999 1040.

Frank E. Brodnax, CPA, Ellin & Tucker, Chartered

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial, The Sun's telephone information service, at 410-783-1800. Call 410-268-7736 in Anne Arundel County, 410-836-5028 in Harford County, 410-848-0338 in Carroll County. Using a touch-tone phone, punch in the four-digit code 6225 after the greeting. You can also submit questions by e-mail through The Sun's Web site, www.sunspot.net/tax.

Selected questions will be answered in the Business section. No questions will be answered personally.

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