Filing federal and state income taxes can be dicey in some of the simplest situations, and this year, same-sex couples may find the process particularly complicated.
The Internal Revenue Service recently announced that, beginning with the 2014 tax filing season, they will use a “state of celebration” rule for recognizing marriages.
According to Dr. John Yeutter, certified professional accountant and associate professor of accounting at Northeastern State University, as a result of the U.S. Supreme Court decision U.S. vs. Windsor, the federal government recognizes all marriages recognized by states, sovereign tribes or foreign countries.
While Oklahoma does not recognize or allow same-sex marriage, Oklahomans who were married legally in states permitting such unions will now be able to take advantage of the federal law.
“This applies to all federal programs, including Social Security and taxes,” said Yeutter. “As I understand it, this can be applied retroactively, so a married couple can file amended returns for all open years. This is usually the prior three years. This can, and should, be done immediately.”
According to a report by taxfoundation.org, same-sex couples who live in states that do not recognize same-sex marriages will need guidance on how to prepare state income tax returns, as they will differ greatly from the federal return.
Viable options include permitting taxpayers to reference a “dummy” federal return reflecting single filing status for their state return; permitting taxpayers to split a joint federal return down the middle, using one-half for each single state return; or creating a new filing status permitting any taxpayer that files a joint return, especially if the state presently recognizes civil unions or domestic partnerships.
Yeutter said it will be key for same-sex couples who have been legally married to seek help before filing any sort of amended return.
“The IRS website does not provide any model language for the amended returns,” said Yeutter. “A tax professional can assist, particularly with filing amended returns.”
The tax foundation indicated it will be particularly important for same-sex couples to not consider “delinking” or “decoupling” the state’s tax code from the federal tax code.
“Such a step would impose huge compliance costs on nearly all state taxpayers and potentially cause economic damage,” wrote Joseph Henchman for taxfoundation.org. “Such a response would be disproportionate since other viable options are available.”
Twenty-four states do not recognize same-sex marriages, but do require state taxpayers to reference federal returns on state documents, including: Arizona, Colorado, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucy, Louisiana, Michigan, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, Utah, Virginia, West Virginia and Wisconsin.
Wisconsin now has a new form to deal with same-sex marriages, despite not recognizing the unions for state income tax purposes.
“Same-sex individuals who file a joing federal income tax return must complete a new Wisconsin form, Schedule S, Allocation of Income to be Reported by Same Sex Couples Filing a Joint Federal Return,” said Phil Rosencranz, of TAX-LITC, in an email. “Schedule S shows the amount of income as reported on the federal return that is allocable to each individual, and determines the federal adjusted gross income to be used for Wisconsin tax purposes. Wisconsin marital property law does not apply to this allocation.”
To learn more about how the IRS is handling tax returns for same-sex couples, visit www.tahlequahTDP.com/on lineexclusives.