Federal Recognition of Same Sex Couples Accelerating
Federal Recognition of Same Sex Couples Accelerating
This article does not provide expert tax advice. Before acting on the following information consult a qualified tax advisor.
In spite of the odious federal Defense of Marriage Act, the federal recognition of same sex couples is accelerating.
Now three rulings by the Internal Revenue service apply federal tax law in ways that essentially recognize the existence of same sex families in several states, including California.
For example, the IRS now says that, in states like California, each member of a couple, registered as domestic partners should report one half of the couple's income on the federal income tax return. That has been possible for married couples for years.
This helps couples where one earns much more than the other. If, in future, each reports half their family income on their federal tax returns, the total tax owed by the family may be lower than if each partner reported his or her actual income.
This ruling overturns an earlier 2006 IRS ruling which had required that each member of a same sex couples report his or her actual income each year. The new ruling says that registered domestic partners in California can go back and amend their earlier returns, but it does not require them to do so.
A second IRS ruling has to do with IRS negotiations with tax payers who owe back taxes. The delinquent tax payer may offer to pay less than the full amount owed in hopes the IRS will settle for that amount. Often the IRS will look at the total assets of that taxpayer to see if he or she could reasonably pay more. This second ruling says that the IRS can look at the assets of both the tax delinquent and his or her registered domestic partner when making that determination. Based on their estimate of the whole family's assets the IRS might turn down the offer in hopes of getting more.
A third ruling says it applies only to the taxpayer who requested an opinion. However, it seems to have wider implications. For some years now there has been the suggestion that if a domestic partner with greater income helps support one with less income, then the first partner is making a gift to the second partner which should be reported to the IRS. And gifts in excess of legal limits might be taxable.
This ruling answered saying, because California has applied community property law to registered domestic partners the extra support provided by the partner with higher income does not result in a gift that must be reported.
Boyce Hinman
b.hinman@calcomui.org