Community property is any property held jointly by a husband and wife. The community property issue surfaces when dealing with proprietorships. Proper understanding of this concept is important because it determines when and when not to record ownership changes on Commission records.
"Community property consists of the property, other than separate property, acquired by either spouse during marriage."
From the above, community property is anything and everything that is not separate property.
Most of the community property determinations done in Status are done on the telephone. If a situation is particularly involved or there is the potential for misunderstanding on our part or the employer's part, ask for the details of the situation in writing.
When an employer contends that separate property exists, the burden of proof lies with them. Essentially, for separate property to exist, a spouse must maintain all aspects of a business as if he/she were not married. There should be no sharing of authority and no commingling of funds with community property. Some questions to ask are:
When a proprietorship business is jointly owned by a husband and wife, the account will be styled in both spouses' names. As long as the business remains community property, the latest Status Report should always reflect the names of both spouses.
When a proprietorship is owned solely by a husband or wife, style the account in the individual owner's name only. The Status Report and FTC should document the business as the sole property of that individual spouse.
Sometimes an Employer will request their account, previously styled in both spouses' names, be restyled in the name of only one spouse. This is permissible under current procedures, however, the request must be verbal or written. The account can be styled in only one spouse’s name, as long as the business is community property and C-1, C-1FR, Item # 11, shows both names. The accounts examiner will document FTC concerning the employer’s styling request.
As long as the business remains community property, the latest Status Report should always reflect the names of both spouses. Document FTC.
When a proprietorship is jointly owned by a husband and wife and a divorce occurs where one spouse acquires all of the business, establish a new account for the spouse receiving the business. The spouse receiving the business will be liable under Section 201.022 and Section 204.083 will apply. It is never proper to merely restyle an account when a divorce occurs. The new account should be established using the date of the final divorce decree.
When a proprietorship is jointly owned by a husband and wife and a divorce occurs where each spouse acquires only part of the business, establish a new account for each spouse if liability exists. The effective date for the partial transfer is the date of the final divorce decree unless a court order specifies a different date. It is never proper to merely restyle an account when a divorce occurs.
When a proprietorship is owned solely by a husband or wife and a divorce occurs, no ownership change should be recorded. Since the business is not community property a new account is not required. If a spouse's name changes because of divorce, restyle the account using the new name. Request an amended Status Report and document FTC.
If an employer is liable under regular or agricultural employment and either spouse dies, it is necessary to determine if community property exists.
If the business is community property and it goes to the surviving spouse without going through an estate, secure an amended Status Report to restyle the account in the surviving spouse's name and document FTC.
If the business is not community property, goes through an estate, or goes to other heirs a new account is required.
If an Employer is liable under domestic employment only and either spouse dies, restyle the account in the surviving spouse's name without a community property investigation. An amended Status Report is not necessary if adequate information is provided by the surviving spouse. There should be an explanation placed on FTC.
When an individual operating a sole proprietorship marries, the investigating Accounts Examiner should:
When two individuals, each with businesses marry, determine if the businesses remained separate property or became community property.
If the businesses remained separate property, document FTC. Since the businesses are not community property there is no ownership change and new accounts are not required.
If the businesses became community property it is necessary to close both existing accounts and establish a new successor account. The new account will be liable under Section 201.022 and the rate will transfer.
If a spouse's name changes because of marriage, restyle the account using the new name. An amended Status Report is not necessary. Document FTC.
A common law marriage is defined as a mutual agreement between a man and a woman without a civil or religious ceremony.
Common law marriages are recognized by the Tax Department using the same procedures and with the same validity as other marriages. If an employer submits a Status Report indicating a common law marriage exists, it should be accepted on face value, unless there is reason to believe otherwise. Status personnel should not make determinations regarding an employer's common law marital status. The following is provided for information sake only.
For a man and woman to be married under common law, they must:
When in receipt of information involving a community property issue:
