North Carolina Filing Status for Non-Residents
WDKebschull
<< ------------------------------------------ >>
North Carolina Law:
Section 105-152
e) Joint Returns.-- A husband and wife shall file a single
income tax return jointly if (i) their federal taxable income is
determined on a joint federal return and (ii) both spouses are
residents of this State or both spouses have North Carolina
taxable income. ...
Translation from North Carolina Instructions for Individual
Income Tax:
Page 3
You and your spouse must file a joint North Carolina return if
you filed a joint federal income tax return, and both of you
were residents of North Carolina or both of you had North
Carolina Taxable taxable income. All other individuals must
file separate returns.
Page 5
If you filed a joint federal return but cannot file a joint
North Carolina return because your spouse is a nonresident and
had no North Carolina taxable income, you must calculate your
federal taxable income as a married person filing a separate
return.
Complete either a federal return as married filing separately
reporting as only your income, exemptions, and deductions, ...
While the law clearly requires the filing of a joint North
Carolia return if a joint Federal return was filed and both
spouses had North Carolina income regardless of resident or
nonresident status, the law appears to be mute on whether or not
a nonresident couple who filed a joint Federal return files a
joint North Carolina return or the one with North Carolina
income files a separate return.
Where in North Carolina law does it say that a separate return
must be filed by a nonresident if he/her filed a joint Federal
return with spouse and he/she was the only one that had North
Carolina income?
I know that some states require the filing of separate returns
where one spouse is a resident and the other spouse is a
nonresident. But do any other states have the same requirement
for a nonresident as North Carolina with respect to filing a
separate return.
With North Carolina in the process of refunding over $1.2
billion in illegally imposed taxes, there can be no question as
to whether North Carolina can be somewhat creative when putting
the squeeze on taxpayers.
Since IRS ignores Section 111(a) of the IRC and includes
itemized deductions in the calculation of the taxable portion of
Social Security benefits and then uses the refund and any
taxable Social Security attributable to the refund to reduce
medical, miscellaneous and casualty and theft loss deductions,
etc. As a consequence of this illegal nonsense, some North
Carolinian will end up paying illegally imposed Federal income
taxes and additional state income tax as a result of receiving a
refund of state income taxes that were imposed illegally!
William P. Brown
<< ------------------------------------------ >>
WDKebschull <kebschull...@aol.com.invalid> wrote:
> While the law clearly requires the filing of a joint North
> Carolia return if a joint Federal return was filed and both
> spouses had North Carolina income regardless of resident or
> nonresident status, the law appears to be mute on whether or not
> a nonresident couple who filed a joint Federal return files a
> joint North Carolina return or the one with North Carolina
> income files a separate return.
That is not the way I read the material you quoted. The
material you quote describes the situation in which a joint
NC return must be filed. Then it goes on to say if you're
not required to file a joint NC return, but - I deduce - you
have NC income, then you are required to file a separate NC
return.
> Where in North Carolina law does it say that a separate return
> must be filed by a nonresident if he/her filed a joint Federal
> return with spouse and he/she was the only one that had North
> Carolina income?
Well, you didn't quote the entire NC law but I'll bet
somewhere it says that if you had NC source income then you
have to file an NC income tax return. The material you did
quote makes it clear, to me anyway, whether it is a joint or
separate return must the filed.
> I know that some states require the filing of separate returns
> where one spouse is a resident and the other spouse is a
> nonresident. But do any other states have the same requirement
> for a nonresident as North Carolina with respect to filing a
> separate return.
I don't know. I doubt that the answer makes a difference.
> With North Carolina in the process of refunding over $1.2
> billion in illegally imposed taxes, there can be no question as
> to whether North Carolina can be somewhat creative when putting
> the squeeze on taxpayers.
Maybe, maybe not.
> Since IRS ignores Section 111(a) of the IRC and includes
> itemized deductions in the calculation of the taxable portion of
> Social Security benefits and then uses the refund and any
> taxable Social Security attributable to the refund to reduce
> medical, miscellaneous and casualty and theft loss deductions,
> etc. As a consequence of this illegal nonsense, some North
> Carolinian will end up paying illegally imposed Federal income
> taxes and additional state income tax as a result of receiving a
> refund of state income taxes that were imposed illegally!
Maybe, maybe not.
Regards,
Bill
--
Associate Professor of Accounting
School of Business & Economics, Longwood College
http://web.lwc.edu/staff/wpbrown/wpbrown.htm
(Opinions expressed are mine, not my employer's.)
kat...@my-deja.com
<< ------------------------------------------ >>
WDKebschull <kebschull...@aol.com.invalid> wrote:
> North Carolina Law:
>
> Section 105-152
> e) Joint Returns.-- A husband and wife shall file a single
> income tax return jointly if (i) their federal taxable income is
> determined on a joint federal return and (ii) both spouses are
> residents of this State or both spouses have North Carolina
> taxable income. ...
>
> Translation from North Carolina Instructions for Individual
> Income Tax:
>
> Page 3
>
> You and your spouse must file a joint North Carolina return if
> you filed a joint federal income tax return, and both of you
> were residents of North Carolina or both of you had North
> Carolina Taxable taxable income. All other individuals must
> file separate returns.
>
> Page 5
>
> If you filed a joint federal return but cannot file a joint
> North Carolina return because your spouse is a nonresident and
> had no North Carolina taxable income, you must calculate your
> federal taxable income as a married person filing a separate
> return.
>
> Complete either a federal return as married filing separately
> reporting as only your income, exemptions, and deductions, ...
>
> While the law clearly requires the filing of a joint North
> Carolia return if a joint Federal return was filed and both
> spouses had North Carolina income regardless of resident or
> nonresident status, the law appears to be mute on whether or not
> a nonresident couple who filed a joint Federal return files a
> joint North Carolina return or the one with North Carolina
> income files a separate return.
>
> Where in North Carolina law does it say that a separate return
> must be filed by a nonresident if he/her filed a joint Federal
> return with spouse and he/she was the only one that had North
> Carolina income?
I think this is how they get there.
The imposition statute (Sec. 105-152(a)) requires every
resident who meets the dollar amount filing requirements,
and every nonresident who has NC source income AND meets the
dollar amount filing requirements, to file an income tax
return. So far, the statute speaks only in terms of
individuals.
Sec. 105-152(e), which you quoted, requires a husband and
wife to file a joint return under certain circumstances.
There is nothing else in the law, at least I can't find
anything, that specifies how married individuals are to
file. At that point we fall back to the imposition statute,
which says each individual who meets the requirements of the
statute must file a return. Hence, it appears, those who
are not REQUIRED by subsection (e) to file a joint return
must file separately, since there is no provision that would
ALLOW them to file jointly. And that would include a
married nonresident who has NC source income but whose
spouse does not.
I agree, it's screwy, but it looks to me like a reasonable
interpretation of the statute as she is writ. In fact, I
don't see anything in the statute that would empower the DOR
to allow anyone who doesn't meet the requirements of
subsection (e) to file jointly.
Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice. The views
expressed herein are those of the writer and are not
expressed on behalf of her employer.
WDKebschull
<< ------------------------------------------ >>
WDKebschull <kebschull...@aol.com.invalid> wrote:
> While the law clearly requires the filing of a joint North
> Carolia return if a joint Federal return was filed and both
> spouses had North Carolina income regardless of resident or
> nonresident status, the law appears to be mute on whether or not
> a nonresident couple who filed a joint Federal return files a
> joint North Carolina return or the one with North Carolina
> income files a separate return.
CORRECTION:
While the law clearly requires the filing of a joint North
Carolina return if a joint Federal return was filed and the
couple were North Carolina residents or if the nonresident
couple both had North Carolina income, the law appears to be
mute on whether or not a nonresident couple who filed a joint
Federal return can file a joint North Carolina return if only
one had North Carolina income. The instructions indicate that
the one with North Carolina Income must file married filing
separately.
Strike "Since" in following sentence.
WDKebschull
<< ------------------------------------------ >>
"William P. Brown" <wpb...@my-deja.com> wrote:
> WDKebschull <kebschull...@aol.com.invalid> wrote:
>> While the law clearly requires the filing of a joint North
>> Carolia return if a joint Federal return was filed and both
>> spouses had North Carolina income regardless of resident or
>> nonresident status, the law appears to be mute on whether or
>> not a nonresident couple who filed a joint Federal return
>> files a joint North Carolina return or the one with North
>> Carolina income files a separate return.
> That is not the way I read the material you quoted. The
> material you quote describes the situation in which a joint
> NC return must be filed.
Yes, that part is the LAW.
> Then it goes on to say if you're not required to file a joint
> NC return, but - I deduce - you
> have NC income, then you are required to file a separate NC
> return.
Yes, that is what the INSTRUCTIONS say. But..
>> Where in North Carolina law does it say that a separate return
>> must be filed by a nonresident if he/her filed a joint Federal
>> return with spouse and he/she was the only one that had North
>> Carolina income?
> Well, you didn't quote the entire NC law but I'll bet
> somewhere it says that if you had NC source income then you
> have to file an NC income tax return. The material you did
> quote makes it clear, to me anyway, whether it is a joint
> or separate return must the filed.
The only issue is whether or not it can be a joint return or
it must be a MFS return under the LAW is written.
>> I know that some states require the filing of separate returns
>> where one spouse is a resident and the other spouse is a
>> nonresident. But do any other states have the same requirement
>> for a nonresident as North Carolina with respect to filing a
>> separate return.
> I don't know. I doubt that the answer makes a difference.
The question was asked to determine if any other states have
the same strange requirement. I was not suggesting that the
absence the same requirement in other states would
necessarily have any impact on the North Carolina situation,
particularly if the requirement for filing MFS, asd opposed
to MFJ, could be found in North Carolina LAW.
>> With North Carolina in the process of refunding over $1.2
>> billion in illegally imposed taxes, there can be no question
>> as to whether North Carolina can be somewhat creative when
>> putting the squeeze on taxpayers.
> Maybe, maybe not.
Well it can at least it can be stated that under the current
circumstances that in the past the North Carolina legislature did
not exibit due respect for some rather fundamental law.
>> Since IRS ignores Section 111(a) of the IRC and includes
>> itemized deductions in the calculation of the taxable portion
>> of Social Security benefits and then uses the refund and any
>> taxable Social Security attributable to the refund to reduce
>> medical, miscellaneous and casualty and theft loss deductions,
>> etc. As a consequence of this illegal nonsense, some North
>> Carolinian will end up paying illegally imposed Federal income
>> taxes and additional state income tax as a result of receiving
>> a refund of state income taxes that were imposed illegally!
> Maybe, maybe not.
Why not insert "DEFINITELY" OR "DEFINITELY NOT" in the
previous paragraph so we can know where you really stand?
Professor Bill:
If you really want to mess with your students minds give
them an assignment to reconcile the instructions for Lines 2
and Line 6 on Form 6251 with Sections 56(b)(1)(D) and 111(a)
of the IRC and then after they have completed that task have
them reconcile their first reconcilations with the
instructions for the similar lines on Form 6251 for tax year
1993. Seems to me that would offer them a profound learning
experience and a real world experience in dealing the IRS
mentality.
Cheers,
WDK
WDKebschull
<< ------------------------------------------ >>
>> While the law clearly requires the filing of a joint North
>> Carolia return if a joint Federal return was filed and both
>> spouses had North Carolina income regardless of resident or
>> nonresident status, the law appears to be mute on whether or
>> not a nonresident couple who filed a joint Federal return files
>> a joint North Carolina return or the one with North Carolina
>> income files a separate return.
>>
>> Where in North Carolina law does it say that a separate return
>> must be filed by a nonresident if he/her filed a joint Federal
>> return with spouse and he/she was the only one that had North
>> Carolina income?
> I think this is how they get there.
>
> The imposition statute (Sec. 105-152(a)) requires every
> resident who meets the dollar amount filing requirements,
> and every nonresident who has NC source income AND meets the
> dollar amount filing requirements, to file an income tax
> return. So far, the statute speaks only in terms of
> individuals.
>
> Sec. 105-152(e), which you quoted, requires a husband and
> wife to file a joint return under certain circumstances.
>
> There is nothing else in the law, at least I can't find
> anything, that specifies how married individuals are to
> file. At that point we fall back to the imposition statute,
> which says each individual who meets the requirements of the
> statute must file a return. Hence, it appears, those who
> are not REQUIRED by subsection (e) to file a joint return
> must file separately, since there is no provision that would
> ALLOW them to file jointly. And that would include a
> married nonresident who has NC source income but whose
> spouse does not.
>
> I agree, it's screwy, but it looks to me like a reasonable
> interpretation of the statute as she is writ. In fact, I
> don't see anything in the statute that would empower the DOR
> to allow anyone who doesn't meet the requirements of
> subsection (e) to file jointly.
I think there may be some language that indicates that North
Carolina law follows Federal law where there is no exception
provided for NC purposes. I will have to search that out.
That could be the magic bullet since NC has not been
explicit in their law. It seems to me that the reason for
subsection (e) is based on administrative grounds.
When I consider how IRS has bollized the interpretation of
Section 111(a) and 56(b)(1)(D)with the instructions that are
issued to taxpayers, I have have to remain skeptical of
interpretations that appear to be "screwy" as you put it.
Maybe if Tennessee, which has no state income tax, created
one only applicable to North Carolina resident who dared to
work in Tennessee, some NC politicians would get the
messaage.
Maryland has a special nonresident form for taxpayers who
are residents of New York City and Wilmington, DE that
requires them to pay the "local" income tax in Maryland.
This is because those jurisdictions require Maryland
resident who work in those jurisdictions to pay their local
tax. Otherwise, nonresidents (except for residents of states
with reciprocity)pay only the state portion of the Maryland
Income Tax.The Maryland Income Tax is a a bifurcated tax
scheme having a state portion and a local portion. However
the "local" tax is required by state law, imposed under
state law, and collected by the state. The county
governments decide the tax rate within limits provided under
state law. Of course when a Maryland resident has income
from out of state, they can claim a credit against only the
state portion of the Maryland Income Tax. For 1999, the
state rate was 4.85 percent and the county rate was 2.52
percent. Thus Maryland residents get hammered when claiming
a credit for taxes paid to other states.
Thanks for your input.
WDK
wpb...@my-deja.com
<< ------------------------------------------ >>
<<SNIP>>
>> Maybe, maybe not.
>> Maybe, maybe not.
Either because I don't have enough information to form the
confirming opinion you seem to desire or because I disagree
with your premise, your implied assumptions, and/or your
conclusions.
As I expected, a complete reading of NC Section 105-152
makes your original question (about the requirement for some
married people to file a separate return) go away. In
particular,
**BEGIN QUOTE**
Sec. 105-152. Income tax returns.--
(a) Who must file.--The following individuals shall
file with the Secretary an income tax return under
affirmation:
(As amended by Ch. 1110, Laws 1967; Ch. 476, Laws
1973; Ch. 728, Laws 1989; Ch. 930, Laws 1992, effective July
10, 1992.)
(1) Every resident required to file an income tax
return for the taxable year under the Code and every
nonresident who (i) derived gross income from North Carolina
sources during the taxable year attributable to the
ownership of any interest in real or tangible personal
property in this State or derived from a business, trade,
profession, or occupation carried on or in this State and
(ii) as required to file an income tax return for the
taxable year under the Code.
(As amended by Ch. 1340, Laws 1957; Ch. 1287, Laws
1974; Ch. 315, Laws 1977; Ch. 728, Laws 1989, effective for
taxable years beginning on or after January 1, 1989.)
(2) (Repealed.)
(3) Any individual whom the Secretary believes to be
liable for a tax under this Part when so notified by the
Secretary and requested to file a return.
**END QUOTE**
The general rule is that _individuals_ must file North
Carolina income tax returns. The part you quoted describes
an exception to the general rule in which a couple files a
joint NC return. People who don't meet the exception follow
the general rule.
> Professor Bill:
>
> If you really want to mess with your students minds give
> them an assignment to reconcile the instructions for Lines 2
> and Line 6 on Form 6251 with Sections 56(b)(1)(D) and 111(a)
> of the IRC and then after they have completed that task have
> them reconcile their first reconcilations with the
> instructions for the similar lines on Form 6251 for tax year
> 1993. Seems to me that would offer them a profound learning
> experience and a real world experience in dealing the IRS
> mentality.
If I want to mess with my students minds I'll give them
incomplete quotes from the applicable law, then scatter my
questions throughout the quoted material and lace those
questions with value judgments and loaded terms.
Regards,
Bill
#*#*#
Associate Professor of Accounting
School of Business & Economics, Longwood College
http://web.lwc.edu/staff/wpbrown/index.htm
kebsc...@my-deja.com
>>> Maybe, maybe not.
>>> Maybe, maybe not.
O.K., since you brought it up let's focus on "(ii) as
required to file an income tax returnn for the taxable year
under the Code"
The reference to the Code is to the Internal Revenue Code.
Under the IRC a married couple has the option of filing as
MFS or MFJ. I believe that most will file MFJ since it is
generally advantageous to do so. IF MFJ is used on the
Federal tax return Section 105-152(e) REQUIRES that North
Carolina residents file MFJ and REQUIRES nonresidents
couples to file MFJ if both had North Carolina taxable
income.
Section 105-152(e) provides:
Joint Returns-A husband and wife shall file a single income
tax return jointly if (i)their federal taxable income is
determined on a joint federal return and (ii) both spouses
are residents of the State or both spouses have North
Carolina taxable income.
> (As amended by Ch. 1340, Laws 1957; Ch. 1287, Laws
> 1974; Ch. 315, Laws 1977; Ch. 728, Laws 1989, effective for
> taxable years beginning on or after January 1, 1989.)
>
> (2) (Repealed.)
>
> (3) Any individual whom the Secretary believes to be
> liable for a tax under this Part when so notified by the
> Secretary and requested to file a return.
> **END QUOTE**
>
> The general rule is that _individuals_ must file North
> Carolina income tax returns. The part you quoted describes
> an exception to the general rule in which a couple files a
> joint NC return. People who don't meet the exception follow
> the general rule.
I beg to differ with you on whether Section 105-152(e)
provides an EXCEPTION or specifies a REQUIREMENT. You have
indicated that it provides an EXCEPTION. I believe that it
states a REQUIREMENT for the following reasons:
Reason 1: The word "shall" is used in section 105-152(e).
Shall in the context denotes a REQUIREMENT.
Reason 2: That which "shall" be done (THE REQUIREMENT) is
based on certain conditions. The requirement is conditioned
upon, among other things, the filing of a federal return as
MFJ. There are reasonable administrative reasons for
requiring the filing of a MFJ return at the state level if a
federal MFJ returned were filed.
Reason 3: There is no section in the North Carolina Statutes
that specifically precludes a nonresident couple who choses
to do so from filing a a joint return as a consequence of
only one spouse having North Carolina taxable income
Reason 4: Common sense. Or as they say in North Carolina,
" I may have been born in the morning, but it wasn't this
morning.
At best, the instruction requiring a married nonresident
couple from filing MFJ unless both had taxable North
Carolina income is based on language in statutes that is
vague, ambiguous, and conflicting but in reality only exists
in the minds of those that wrote the instructions.
Sometimes those that write the tax instructions are just a
little over reaching and are subsequently at a loss to
provide a creditable explanation as to why the instructions
that are issued are in direct conflict with the language in
the tax law. Two of my favorites are the instructions
related sections 111(a) and 56(b)(1)(D)of the Internal
Revenue Code.
Regarding Section 111(a):
Based on IRS instuctions the gross income attributable to a
state income tax refund or other itemized deduction recovery
can exceed the amount of the recovery by 85%. Why? Because
the geniuses who wrote the instructions included state
income tax refunds and other itemized deductions in the
calculation of taxable portion of Social Security income.
As a consequence, the gross income attributable to the
recover can exceed the amount of the recovery. There is
also a problem with including itemized deduction recoveries
in the calculation of deductions, exemptions, and credits,
etc.
Go to the IRS web site and take a look at the minutes of the
October 9,1999, meeting of the Citizen's Advocacy Panel for
the Pacific-Northwest. Someone just forgot to include any
reference to Section 111 (a) of the Internal Revenue Code in
the minutes and the reason that Speaker 2 raised the issue
was because of that section. Care to guess who Speaker 2
was?
Speaker 2 also provided the Panel considerable documentation
related to the issue. The CAP passed the correspondence to
the district counsel as indicated in the minutes for the
January 21, 2000 meeting. See Case #158 near the bottom of
the minutes. I think that we will be waiting for a long time
to see a response from the district counsel in the CAP
minutes or anywhere else. Included in the correspondence
were 18 question that apparently have proved to be a little
troublesome. While the Office of Chief Counsel has had
great difficulty understanding the meaning of section
111(a), a member of the Taxpayer Advocate Service staff in
North Carolina had no trouble understanding the true meaning
of the section.
After the National Taxpayer Advocate indicated to me that
IRS's interpretation of 111(a) was reasonable and consistent
with the law, he apparently had an epiphany because in his
report to Congress for 1999 he included a legislative
recommendation to change the method of determining the
taxable portion of Social Security income. The part of the
recommended change that relates to the issue that I raised
is that taxable income rather than modified adjusted gross
income would be used to determine the taxable portion of
Social Security income. This would preclude both the income
used to pay an itemized deductible expense and the recovery
of that expense being used to increase the taxable portion
of Social Security income in respective years.
Regarding Section 56(b)(1)(D):
The refunds that are entered as a negative amount on Line 6
of Form 6251 are those deductions to which paragraphs
(1),(2), and (3) of Section 164(a) applied. The reference
in section 56(b)(1)(D) is to refunds of deductions to which
section 56(b)(1)(a)(ii) applied. The instruction writers
overlooked the part of section 56 that contained the words
"in lieu of" As a consequence refunds that provided a tax
benefit in a prior year are not included in gross income for
AMT purposes in the year the refund is received. Those
refunds of deductible expenses from a prior year to which
section 56(b)(1)(a)(ii) applied are excluded from gross
income for both regular and AMT purposes by section 111(a)
as amended in 1986.
wpb...@my-deja.com
<< ------------------------------------------ >>
kebsc...@my-deja.com wrote:
<<SNIP>>
> I beg to differ with you on whether Section 105-152(e)
> provides an EXCEPTION or specifies a REQUIREMENT. You have
> indicated that it provides an EXCEPTION. I believe that it
> states a REQUIREMENT for the following reasons:
Section 105-152(e) specifies a requirement for joint filing
that provides an exception to the general rule. Being an
exception and being a requirement are not mutually exclusive
characteristics. It is possible, as on this issue, to be
both.
> Reason 1: The word "shall" is used in section 105-152(e).
> Shall in the context denotes a REQUIREMENT.
Yes, it is a requirement that is an exception to another,
more general requirement.
> Reason 2: That which "shall" be done (THE REQUIREMENT) is
> based on certain conditions. The requirement is conditioned
> upon, among other things, the filing of a federal return as
> MFJ. There are reasonable administrative reasons for
> requiring the filing of a MFJ return at the state level if a
> federal MFJ returned were filed.
Section 105-152(e) does indeed describe certain conditions
that must be met for the "shall" to be operable.
There are also reasonable administrative reasons for barring
non-residents who do not have North Carolina income from
filing a North Carolina return.
> Reason 3: There is no section in the North Carolina Statutes
> that specifically precludes a nonresident couple who choses
> to do so from filing a a joint return as a consequence of
> only one spouse having North Carolina taxable income
Yes, there is. The general rule in Section 105-152(a) says
each *individual* shall file a return. As I, and the only
other poster to this thread, have said before, the joint
filing requirement in Section 105-152(e) is an exception
that applies only to the married couples that meet the
criteria included in Section 105-152(e). If the exception
doesn't apply, then the more general rule continues to
govern. That is the way tax law is written at both the N.C.
and federal level.
> Reason 4: Common sense. Or as they say in North Carolina,
> " I may have been born in the morning, but it wasn't this
> morning.
Irrelevant to the discussion.
> At best, the instruction requiring a married nonresident
> couple from filing MFJ unless both had taxable North
> Carolina income is based on language in statutes that is
> vague, ambiguous, and conflicting but in reality only exists
> in the minds of those that wrote the instructions.
The language in the statute is not the least be vague or
ambiguous to people who understand how tax laws are written.
<<SNIPPED all the stuff commenting in the IRC and the
National Taxpayer Advocate>>
My understanding of Section 105-152(e) has been confirmed
by a person at the N.C. Department of Revenue's taxpayer
assistance line. Of course, she would be in the same group
that wrote the instructions you disagree with but there you
are.
Drew Edmundson
<< ------------------------------------------ >>
kebsc...@my-deja.com wrote:
snip
> At best, the instruction requiring a married nonresident
> couple from filing MFJ unless both had taxable North
> Carolina income is based on language in statutes that is
> vague, ambiguous, and conflicting but in reality only exists
> in the minds of those that wrote the instructions.
>
> Sometimes those that write the tax instructions are just a
> little over reaching and are subsequently at a loss to
> provide a creditable explanation as to why the instructions
> that are issued are in direct conflict with the language in
> the tax law. Two of my favorites are the instructions
> related sections 111(a) and 56(b)(1)(D)of the Internal
> Revenue Code.
I have stayed out of this up to this point but I would like
to suggest that you read the regulations. In areas where
the law isn't clear the Secretary has the right to issue
regulations that are a reasonable interpretation of the
statute.
I believe the regulations are the source of the instructions
and the writer of the instructions is not "making" law but
is merely regurgitating the regulations.
So if you have a problem it is with the regulations *not*
the instructions.
North Carolina Rule/ Regulation, [Sec. 17:06B.0104. Filing
Individual Income Tax Returns]--Items Requiring Special
Attention.--
<snip>
(e) The same filing status checked on the Federal
income tax return must be checked on the North Carolina
income tax return. However, if either the taxpayer or the
taxpayer's spouse is a nonresident and had no North Carolina
taxable income for the taxable year, the filing status
MARRIED FILING SEPARATELY must be checked.
--- end quoted text
emphasis is in the original.
IMO the regulations are a reasonable interpretation based on
105-152(e).
(e) Joint Returns.--A husband and wife shall file a
single income tax return jointly if (i) their federal
taxable income is determined on a joint federal return and
(ii) both spouses are residents of this State or both
spouses have North Carolina taxable income.
--- end quoted text
The *or* is key. Lets try a decision tree for a nonresident
with NC source income and a nonresident spouse without any
NC source income who file a joint return.
Q1: Did they file a joint federal return?
A1: Yes, go to Q2. No, file separately and *stop* here.
Q2:Are both residents of NC?
A2: Yes, then file jointly. No, then go to Q3.
Q3: Did both have NC source income?
A3: Yes, then file jointly.
<up to this point I think we agree but please let me know if
you disagree>
A3 (continued) No, then the statute doesn't say.
So the question becomes: Is Sec. 17:06B.0104(e) a
reasonable interpretation? I believe it is. If they are to
file jointly when both have NC source income then when they
don't both have NC source income they must file separately.
Or to try it another way (programming algorithm):
If they both have NC source income then
file jointly
else
file separately.
What other possibility is there after the *else*? Granted
the statute doesn't say the *else* part but what else (sorry
couldn't resist) could go there? Certainly not "file
jointly." If I understand you correctly you feel the else
is: taxpayer choose what you want - MFS or MFJ. Perhaps
this is a reasonable interpretation but since the
Secretary's is also reasonable I think we are stuck with the
Secretary's.
See the following from a NC Admin. Ruling, 1-1-95:
4. Joint Returns (G.S. 105-152)
G.S. 105-152 requires that a husband and wife file a
joint State return if:
a. They file a joint federal income tax return and
b. Both spouses are residents of North Carolina or
both spouses had North Carolina taxable income.
All other individuals must file separate returns.
--- end quoted text
I find no case law on point.
Drew Edmundson, CPA (NC)