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For Same-Sex Couples, Tax Filing is Particularly Complicated

| June 29, 2011
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Elba Rivera and Brooke Oliver of San Francisco have been together for 16 years. They aren't thrilled to pay more money for tax preparation, but as an LGBT activist, Oliver says "It’s worth it. It’s the price of getting our civil rights." Quinn (the dog) kept moving around, hence the blur. (Credit: Rachael Myrow/KQED)

Six states have now legalized same-sex marriage, but the federal Defense of Marriage Act still governs federal law when it comes to gay and lesbian couples.

Given the current political make up of Congress, it would be an understatement to say that federal lawmakers are unlikely to repeal or amend that legislation anytime soon. So across the country, gay rights activists are pursuing legal appeals. Here in California, some have also pushed for change using the tax code.

Santa Clara University Law Professor Patricia Cain was one of the principal forces behind the Franchise Tax Board’s 2007 decision to allow registered domestic couples to file jointly. But it hasn’t been an easy change logistically. Cain and her wife have to deliver one tax profile for the state, and another for the Internal Revenue Service.

“You have to file as married at the state level and single at the federal level,” she explains. “So you have to file two single returns at the federal level. Then you have to fill out a mock joint return at the federal level in order to determine what your state liability is.”

Got that? But Cain isn’t intimidated by the complexity of the tax code, state or federal. She’s energized by the issue, in fact, blogging about it with gusto.

Here’s Cain talking at length about tax law as it applies to same-sex couples. “I think tax law may lead us to true equality one day,” Cain says. “I think the IRS would be very happy if we could all just be treated as married.”

Patricia Cain on the tax code for gay and lesbian married couples

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As Scott James has reported in the Bay Citizen, the IRS recently apologized to same-sex couples who received computer generated queries.

The agency’s statement:

Due to an IRS error, some taxpayers were incorrectly sent letters seeking more information before their tax returns could be processed. These returns were filed primarily by registered domestic partners filing community property returns from Nevada, Washington and California.  The tax returns were marked in ways that were not identified accurately during IRS processing.

As soon as the IRS learned of the mistake, the agency took steps to correct the process to avoid this problem going forward.

At this point, we don’t know precisely how many registered domestic partners wrongly received this letter, but we believe it only involves a few hundred taxpayers.

We are working to identify any returns incorrectly processed before the system was fixed. Meanwhile, anyone who suspects their return was part of this mistake should contact the IRS using the phone number included on the letter and explain that they believe the letter was sent in error.

The IRS apologizes for this mistake and sincerely regrets any inconvenience to taxpayers.

The IRS emphasizes that these letters were system-generated notices and were signed automatically with a manager’s name. The individual had nothing directly to do with this systemic letter. Our managers routinely have their names signed on hundreds of thousands of letters annually covering a wide variety of tax issues.

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Category: Law and Justice, Politics and Government

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About the Author ()

Rachael Myrow hosts the California Report for KQED. Over 17 years in public radio, she's worked for Marketplace and KPCC, filed for NPR and The World, and developed a sizable tea collection that's become the envy of the KQED newsroom. She specializes in politics, economics and history in California - but for emotional balance, she also covers food and its relationship to health and happiness. Reach Rachael Myrow at rmyrow@kqed.org.
  • http://iwanttobeagaydad.wordpress.com Alan E.

    Using the at DIY software just doesn’t cut it anymore. There were too many questions that my husband and I had that there was no way we wanted to risk it. We had been using a CPA for the last few years already, but this year we really got our money’s worth. Fortunately, our CPA only charges us the regular rate for married couples even though they had to do more work. Marriage equality will considerably help small businesses like CPAs by reducing the paperwork load needed.

  • Out of state gay partner

    I live in another state that doesn’t recognize gay marriage or domestic partnership. My partner of 27 years and I are registered domestic partners in California (which allows such arrangements). I still don’t know how to do my federal taxes, much less my state taxes. I am sure that I violate the law every year, but I don’t know what the law is.

  • Paul T. Melevin, Ph.D.

    I found this interview with Patricia Cain to be less than gratifying. The interview failed to get at the heart of the issue which is DISCRIMINATION. Patricia Cain indicated that she was pleased to pay an extra $25K in taxes to have her relationship recognized by the IRS. The IRS is not recognizing her relationship, the IRS still requires her and all other same sex couples to file as SINGLE tax payers. The IRS is merely recognizing the Community Nature of both her and her partner’s property. She indicated that these rules were passed in May, 2010. Guess what, maybe Patricia Cain knew about these rules in 2010 but they did not even update Publication 555 until February 26, 2011. Furthermore, as recognized by both Patricia Cain and the Lambda Legal Defense Fund, the IRS failed to provide instructions on how to handle special circumstances such as when one person’s income is Means Tested (i.e., SSI or Social Security or Veteran’s Pension). Those of us who are barely squeeking by have been put in a very bad situation. My partner only receives Social Security and a very small means tested Veteran’s Pension. According to this law, he needs to count half of my income and count all of his Social Security (Social Security is governed by federal law and the Defense of Marriage Act is still federal). Consequently, if we were to follow this law, all of his income which was previously not taxed is now taxable and when it is combined with half of mine, these rules put him in the 35% tax bracket. In other words, he has gone from 0% to 35%. Rachel, you and the other reporters need to dig into this. Talk about SEPARATE BUT EQUAL rules – Married folks can file under the MARRIED FILING JOINTLY provision. Since 1982, there is supposed to be NO MARRIAGE PENALTY. For Same Sex Couples, there is no such protection. When California passed its Domestic Partner Law in 1999, the IRS immediately notified the State of California that it had to tax all benefits for same sex couples (i.e., Health Benefits) as income. Again, Separate rules for Gays and Lesbians! Married Heterosexuals pay no tax on their health benefits! Until the United States Government repeals DOMA, damage to same sex couples will just continue and the people that are in harm’s way are those who do not have $25K lying around in their bank accounts to pay the IRS because they feel they are now recognized when as I noted earlier, their relationship is NOT RECOGNIZED, only the Community Status of their property is recognized and yet, that too is recognized differently than that of heterosexual married couples. (The exemption provisions provided to heterosexual couples do not even apply to same sex couples.) So, please tell Patricia Cain and the other wealthy Gays and Lesbians, to please stop trying to make these incremental advances that you believe are beneficial. DO SOME RESEARCH and DETERMINE what the consequences of your desired actions will be and please realize that there are serious ECONOMIC CONSEQUENCES to be had and that these can be so dramatic that they will effect one’s ability to continue to receive their income. DOMA has got to be repealed first, otherwise, it just makes our lives worse! Last, and do not think that the IRS is providing any special advice or regulations on how to handles Social Security Income or means tested income. They make it very clear that the head of the IRS has no intention on spending a lot of time developing rules on how to handle these special circumstances. GO TO THE IRS WEB SITE, they state exactly that. Further, they have done very little to train their own employees on these issues which is why over 300 people were sent nasty letters by the IRS when they filed their taxes this year. That is because the IRS deems it a waste of time on their part because they anticipate DOMA being repealed. Unfortunately, until then, the same sex couples will get unequal treatment in the application of the tax laws!