A-LISTS think about it
GAY EQUALITY
Isn’t the implication that the IRS is recognizing same-sex couples? Yes and no. The IRS is not giving these couples “married” filing status, but in a way this
ruling does imply that the IRS recognizes that there is a relationship between the two individuals.
Why won’t the IRS allow these couples to file as “Married Filing Jointly” or “Married Filing Sepa- rately?” Unfortunately, DOMA prohibits the federal government from recognizing marriage as any thing other than “a civil union between one man and one woman.”
How exactly does the ruling impact the way an Registered Domestic Partnership or a same-sex married couple file their taxes? In short, all community property income must be split evenly between two separate
“single status” tax returns. Any separate property will stay with the individual who owns it. This may sound easy, but there are many complications to this ruling.
What are the effects of splitting community property income between such couples? Splitting community property income has negative and positive effects. The couples
IRS CREATES CLASH BETWEEN DOMA AND STATE SOVEREIGNTY by william e. kelly
The 1996 Defense of Marriage Act (DOMA) prohibits the recognition of same-sex couples by any arm of the federal
government. Yet in mid-2010, the IRS reversed the way it recognizes same-sex marriages and registered domestic partner- ships (RDPs) of citizens in community property states such as California, Nevada and Washington. The ruling honored a state’s right to recognize these relationships and aligned the IRS with the community property laws of each state. After speaking with several tax specialists, I sat with Certified Public Accountant Jeremy Dutson of the San Diego ac-
counting firm of Abbas, Jenson and Cundari, Certified Public Accountants. Dutton stressed immediately, that the full im- pact of the ruling is still being deciphered. He pointed out that in California, all property owned by a married couple or RDP is considered either community property; “any asset acquired or income earned within the union” or separate property; “any asset or income earned outside the union.” We began the interview on that point.
who benefit the most are those with a large disparity in income between them, which creates a lower effective (average) tax rate for the couple. Most same-sex couples where there is not a large gap between income levels, will
see a tax increase. This increase is attributed to a large range and combination of vari- ables. The most frequent example is when one individual itemizes and the other takes the standard deduction. The new rule forces each individual to itemize and as a result, the standard deduction is lost. In 2010 the standard deduction was $5,700. The loss of such a large deduction will have a negative impact on one’s tax liability.
Does this ruling penalize most same-sex couples? To make a general statement as to whether most people benefit or are penalized
by the ruling would be difficult. There are numerous contributing factors to consider in any given tax situation. Although, I can say the ruling has put an unfair burden on same-sex and RDP couples because most tax preparers charge more to file these more complicated and time consuming returns.
Are there any other areas that could possibly be impacted by this ruling? Great point Bill—social security and VA benefits are examples of items that are,
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RAGE monthly | OCTOBER 2011
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