Wednesday, August 11, 2010

IRS (Internal Revenue Service) Adopts Rules for Domestic Partners

Well praise the Lord and pass the ammunition! Yesterday I spoke with our CPA about tax planning for 2010 and she said a cryptic phrase of "well the IRS has recently adopted new Domestic Partner rules so this could be interesting." Not wanting to appear stupid and out of touch with the news and especially our community news, I kept my mouth shut and resolved to investigate it on the Internet this morning. Apparently, this new ruling (June 12, 2010) reverses a position the IRS took in 2006, when it said California's registered domestic partners should each report on their own federal tax return only the income they personally earned, not one-half of their community income.

For those of you unaware of my previous blog posts this is it in a nutshell quoted from Box Turtle Bulletin:

For several years, California law has treated couples in domestic partnerships exactly the same as marriages, including in how income tax returns were filed. But the federal government’s DOMA has banned any recognition of same-sex couples as married and the Internal Revenue Service has treated them as though they were two unrelated individuals. This has resulted in the peculiar situation in which a couple files as married for state tax purposes, and then files separate federal returns in which each reports their own individual incomes and deductions.
While it is not true in all cases, quite often this results in same-sex couples paying much higher rates of federal income taxes than they would if they could file jointly, especially when one spouse earns significantly more than the other. It has also resulted in increased time and expense in complying with income tax return preparation.

I'll let you know if we actually get a financial benefit from it, however, it cannot be any worse than the financial hit we took being RDP's last year. I was appalled that as a RDP we would have the benefit of paying more than you average couple federally. I am all about fairness and equality and this didn't sit well with me. Now if we could just get rid of the imputed income bullshit for the health insurance benefit I'd really be happy. Maybe for once in my life I'll look forward to the April 15th filing deadline.

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