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Written by LIsa Neff, Staff writer
Feb 23, 2012
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President Barack Obama mentioned "fair" 14 times to LGBT donors at a private campaign fundraiser on Feb. 9.
The president spoke of fair play whether on Wall Street or Main Street, of everybody in "our society" getting a fair shot and being "treated fairly," of his administration basing its work on "the concept of fairness."
And, the president observed, there are "still areas where fairness is not the rule."
Four days later, the president presented his proposed fiscal 2013 budget to Congress, a $3.8 trillion spending plan. Again, in his remarks, Obama emphasized "fair" — fair shot, fair share.
But gay civil rights advocates, with tax season having arrived, note that same-sex couples often tend to pay more than their fair share for less than equal rights because, in marriage, fairness is not the rule.
DOMA and disparity
The 1996 Defense of Marriage Act, signed into law by Bill Clinton and driven through Congress by Newt Gingrich, defines marriage as the union of a man and a woman, bans federal recognition of same-sex marriages and allows states to refuse to recognize gay marriages performed in other states.
Because of DOMA, same-sex couples are denied more than 1,100 rights and responsibilities related to adoption, parenting, immigration, inheritance, insurance, property ownership, pensions, Social Security and survivor benefits, wrongful death benefits, sick leave, bereavement, domestic violence protection and taxation.
A recent CNNMoney report estimated that same-sex spouses are paying as much as $6,000 a year in extra income taxes because the U.S. government doesn't recognize gay marriage or other partnerships.
At the state level, same-sex couples can marry in six states and the District of Columbia — and they may be able to marry in Washington later this year and in Maryland in 2013. A mix of marriage bans, civil union laws and domestic partnership provisions exist in other states. Some offer joint filing at the state level for same-sex couples. Some don't.
"There are a lot of twists and turns," observed Los Angeles-based accountant Elisha Wiesenberg, who has a sizeable gay and lesbian client base.
Momentum for equality but tax issues linger
In just the first six weeks of 2012, a new marriage bill was signed into law in one state and bills advanced in two other states.
In Maine, voters may decide in November to legalize gay marriage — again — while a marriage equality bill is pending in Illinois.
In California, a federal appeals court has ruled against Proposition 8, the anti-gay amendment passed in 2008 to block same-sex marriages.
The Obama administration continues to refuse to defend DOMA in court and is pushing for passage of a bill to repeal it.
In the meantime, LGBT leaders encourage same-sex couples to protect their families, their assets and their security.
Lambda Legal, a civil liberties group at the forefront of the marriage fight, recommends that couples' "life and financial planning team include an attorney with experience addressing legal issues impacting same-sex and/or unmarried different-sex couples, a financial advisor and, depending upon your circumstances, a certified public accountant."
Financial matters can get complicated quickly — income, home ownership, gifts, inheritance, retirement, tax returns.
"Everybody's returns, no matter whose it is, has some complexity," said accountant Andrew Komisar of Komisar Brady and Co., 135 S. 84th St., Milwaukee.
Wiesenberg concurred: "You add in a few more variables, too many rules, and you have some head-scratching.... It can be mind-boggling to people."
Consider that this spring, same-sex couples in some states may file multiple tax returns.
Registered domestic partners in California must file a joint state income tax return but, because of DOMA, each partner must file an individual federal return. Ten other states allow same-sex couples in legal relationships to file joint state returns, but they too must file single returns with the IRS.
Meanwhile, in Wisconsin, even registered domestic partners file individual returns at the state and the federal level, where credits phase out sooner for single filers.
"Somebody in a domestic partnership situation probably needs some guidance," said Wiesenberg.
Financial and legal professionals can't close the equality gap for same-sex couples, but they can sometimes close the tax gap and minimize other economic hardships, said Susan Davis, who works for Milwaukee-based UBS Financial Services and is the first woman in Wisconsin to become an accredited domestic partnership advisor from the College of Financial Planning.
Davis, also a Cream City Foundation board member, said experts familiar with all the rules can "look for a few things."
Generally, same-sex couples pay more in taxes than married heterosexuals, but there can be advantages when same-sex couples file as individuals.
"You've heard of the marriage penalty," Komisar said of the higher taxes married heterosexual couples, because of their tax bracket, sometimes get hit with in federal filing. "So, it all depends."
A gay couple could come out ahead when filing separately by assigning jointly earned interest income to the lower-income earner and some jointly-made deductions, such as charitable contributions, to the higher-wage earner.
Also, Davis said it is easier for a single filers to reach the floor for allowable medical and other miscellaneous itemized deductions.
And, she said, if both domestic partners are over 65, they would receive more for this additional standard deduction filing single than they would on a joint return.
"There can be a lot of opportunity if you do a little tax planning," observed Wiesenberg.
The professionals offered some tips to simplify tax season for same-sex couples:
• Consult with a qualified tax adviser or preparer. "At-home software programs are great for simple tax situations, but registered domestic partners can have enormously complicated returns," Wiesenberg said. "It varies state by state. ...That's the truth."
Wiesenberg said it is crucial for same-sex couples to find someone who understands the issues. "You never want to be the guinea pig," he warned. "If you can find somebody familiar with your situation, that's best."
Referrals from friends are a good place to start, said accountant Jon Neal of Neal Group, 3001 W. Layton Ave., Greenfield. He works with a number of same-sex couples who were referred "from other clients who liked our work."
Davis said friends and family can provide good referrals, but another professional might also have a valuable lead. As a financial planner in the community, she scouts out knowledgeable attorneys and accountants "that I feel comfortable sending my clients to, that are focused on the issues."
A face-to-face interview also can help find a couple the right guide. "We make sure there is a good fit," said Komisar. "We're not an H&R Block office. That is not who we are.... If you are a brand new client I like to meet face to face."
• Understand the total financial situation. "If you don't already have a clear grasp of both partners' financial situations, now is the time to have those conversations," Wiesenberg said.
Neal added, "We try to minimize the tax burden and optimize the refund. ...In that, there are issues that need to be discussed and addressed and questions that come up, like in the area of who owns what."
• Take notes. Both partners should be prepared to keep detailed records of their transactions and their financial conversations — whether with a tax adviser or, especially, when communicating with the IRS.
Wiesenberg said his clients often are frustrated by the system — or systems — in place for same-sex couples, but he advised that patience can pay off.
