IRS Releases Additional Guidance on Tax Reporting for Community Property Registered Domestic Partners and Same-Sex Spouses in California
Yesterday the IRS released a Question & Answer document addressing a number of questions that have been asked by same-sex couples and tax practitioners in the three community property states that recognize same-sex relationships – California, Washington, and Nevada.
Here is a sample from the IRS Q&A:
Q-1: How do registered domestic partners determine their gross income for 2010?
A-1: Registered domestic partners must each report half the combined community income earned by the partners. In addition to half of the community income, a partner who has income that is not community income must report that separate income.
Q-2: Can registered domestic partners or same-sex spouses whose marriage is recognized under state law file federal tax returns using a married filing jointly or married filing separately status?
A-2: No. Registered domestic partners cannot file using a married filing separately or jointly filing status, because they are not spouses as defined by federal law. Likewise, same-sex partners who are married under state law may not file using a married filing separately or jointly filing status because federal law does not treat same-sex partners as spouses.
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Q-8: How should registered domestic partners report wages, other income items, and deductions on their federal income tax returns?
A-8: Registered domestic partners should report wages, other income items, and deductions according to the instructions to Form 1040, U.S. Individual Income Tax Return, and related schedules. In addition, registered domestic partners should attach the Allocation Worksheet in Table 2 of Publication 555, Community Property, to their separate returns showing how the partners computed the income, deductions, and federal income tax withholding that each reported. Each partner should write the social security number of the other partner in the “Notes” section of the worksheet. If a registered domestic partner does not attach a worksheet, he or she must attach a copy of his or her partner’s Form W-2 or 1099-R (in addition to his or her own) and make a notation on the form showing the division of income and tax withholding.
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Q-17: If a registered domestic partner adopts the child of his or her partner as a second parent or co-parent, may the adopting parent claim the adoption credit for the qualifying adoption expenses he or she pays or incurs to adopt the child?
A-17: The adopting parent may claim an adoption credit to the extent provided under § 36C. Section 36C(d)(1)(C) does not allow taxpayers to claim an adoption credit for expenses incurred in adopting the child of the taxpayer’s spouse. However, the limitation in section 36C(d)(1)(C) does not apply to adoptions by registered domestic partners because registered domestic partners are not spouses as defined by federal law.
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Please note that this document does not consistently refer to same-sex spouses as it should. Every time an answer says that RDPs cannot rely on certain rules, that same rule should apply to same-sex spouses. The entire IRS document can be found at – http://www.irs.gov/newsroom/article/0,,id=245869,00.html
Contact Hone Maxwell LLP today for experienced tax planning and preparation with an expertise in the challenges faced by LGBT taxpayers.