States slow in same-sex tax rulings

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This is a big tax week for America’s gay and lesbian married couples. Effective Sept. 16, they now will file their federal tax returns married filing jointly or married filing separately.

Most of the more than 130,000 married same-sex couples in the United States (per 2010 Census estimates) will, like their heterosexual married couple counterparts, send the Internal Revenue Service a single Form 1040.

That filing will be valid, according to the IRS, regardless of where the couples live.

But many of the same-sex married couples are discovering the streamlined federal filings will be offset by state complications. Since only 13 states and the District of Columbia recognize same-sex marriage and 43 states collect some sort of income tax, chances are many of the same-sex married couples will have to file state returns.

And those couples are still waiting to hear how their state tax departments will deal with their returns.

Separate state returns likely

The consensus is that the income-collecting states that don’t recognize same-sex marriage will require that couples file separate individual returns.

But then, the consensus was that the IRS would use the state of recognition standard — that is, whether states sanctioned same-sex marriages — as its basis for federal filing.

The IRS, however, opted instead to go with the state of celebration standard, saying that if a same-sex couple is legally married in one state and then sets up home in another place that doesn’t recognize the marriage, that doesn’t matter. For federal tax purposes, the couples are married regardless of where they live.

Neither I nor the tax professionals to whom I’ve spoken think this will happen in states that have laws against or state constitutional bans on same-sex marriage. But they have to wait for official word.

When I spoke to Kathy Morgan, an enrolled agent from the Shreveport, La., suburb of Bossier City, earlier this month for my Bankrate story on same-sex married couples and state taxes, she described the situation as limbo. That’s always a bad place for taxpayers and their tax pros to be, especially in a year that got off to a slow start because of Congressional procrastination. Morgan says she has filed more tax return extensions this year than ever before, both for relatively routine tax situations and same-sex couples awaiting word on how to handle their returns.

2 states have decided

At least Morgan, her clients and other Louisiana same-sex married couples finally got word from their state tax department. Louisiana tax officials have announced, “In compliance with the Louisiana Constitution, the Louisiana Department of Revenue “shall not recognize same-sex marriages when determining filing status.”

So it’s one joint federal return and two single or head-of-household returns for gay and lesbian married taxpayers in the Pelican State.

That’s the same situation for Wisconsin’s same-sex married couples. One joint federal tax return, two separate state tax returns.

But those are the only two states so far to officially announce how same-sex married couples living within their borders must file.

Court complications

Filing guidance also could be delayed by court battles in a couple of states.

In New Mexico, which neither bans nor authorizes same-sex marriage on a statewide basis, some county clerks decided to issue marriage licenses to gay and lesbian couples. Now the New Mexico Supreme Court will decide whether same-sex marriage should be legal in all of The Land of Enchantment. A hearing is scheduled for Oct. 23.

A same-sex marriage case also is working its way through court in Ohio. A federal judge in the Buckeye State has ruled that two men’s out-of-state marriage is legal in Ohio.

In issuing the decision, the judge found that the Ohio Constitution “violates rights secured by the … United States Constitution in that same-sex couples married in jurisdictions where same-sex marriages are valid, who seek to have their out-of-state marriage accepted as legal in Ohio, are treated differently than opposite-sex couples who have been married in states where their circumstances allow marriage in that state but not in Ohio.”

In both Ohio and New Mexico, further court rulings aren’t likely to be issued until after the 2014 tax-filing season is underway. But will the questions raised by the lawsuits affect how those states’ tax officials deal with tax filings by same-sex married couples?

Probably not. But then, the IRS surprised us. State tax offices might just do the same.


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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and a co-author of the e-book “Future Millionaires’ Guidebook.”