When the U.S. Supreme Court ruled this summer on gay marriage, it opened the door for same-sex couples around the country who can now file federal taxes together, no matter what state they live in. That created a problem for Idaho, which does not recognize same-sex marriage.
In response, the Idaho State Tax Commission has adopted a new rule, which will affect married, same-sex couples. That rule has social, economic, and political implications, which we'll examine in depth Wednesday morning during Morning Edition. Today, we'll break down some of the nuts and bolts questions that will come out of the change.
Here's a fictional example.
Mary and Beth got married in a state that recognizes same sex unions, but live in Idaho, which does not recognize their marriage. Mary works full time. Beth works part-time. They have two kids, under 18. They own a home in Boise.
Here’s what they need to know to file jointly as a gay married couple in Idaho:
Starting in January, a gay couple, legally married in another state, can fill out a federal IRS form, usually a 1040. Under “Filing Status,” they’ll mark the box “Married filing jointly.” Then, they will fill out the form as a married couple. Once that’s complete, the form is sent to the IRS. That form does not need to go to the Idaho State Tax Commission.
In the case of Mary and Beth, they will mark ‘married filing jointly' on the form. They’ll claim both kids as dependents. And they’ll fill out a Schedule A to write off their home mortgage interest. They’ll send that form to the IRS.
But they can’t send those federal IRS forms to the Idaho Tax Commission, because Idaho’s constitution doesn’t recognize same-sex marriages. So, under the commission's tax rule, they’ll have to take extra steps.
“What you will have to do is basically re-compute your federal taxable income, as if you were a single person,” explains Idaho tax policy manager Michael Chakarun.
“Because Idaho does not recognize that same sex union, they will need to re-compute their return as if they were single or head of household,” adds Doreen Warren who works with Chakarun at the Idaho State Tax Commission.
So, Mary must fill out a new federal 1040 form, as a single person. Beth will also fill out a separate version of the form as a single person. Those forms get sent to the Idaho State Tax Commission, along with two Idaho tax forms, one for Mary, one for Beth. But that can be complicated, because they’re splitting up more than just the form.
“If its [their return] very straightforward with just income and they’re both claiming the standard deduction, it should be very straightforward,” says Chakarun. “If they’re involved with investments or business entities and other more sophisticated transactions, then the level of complexity could be higher, it will be all over the board.”
Gay married couples will have to make some decisions. Should Beth fill out the Schedule A for the mortgage deduction? Should Mary claim the two kids? Can both Beth and Mary claim a child as a dependent? Chakarun says how they divide things is up to the couple, as long as all the numbers add up.
“We run into this all the time with divorced couples where each person claims the kids,” says Chakarun. “We can determine that they’ve double-claimed the dependents and then we can address that issue. Same situation with the same-sex couples. If both of them claim the kids and double up the deduction, we will catch that. That’s just a normal audit, it doesn’t matter what the nature of the relationship is, whether or not Idaho recognizes the marriage or doesn’t recognize the marriage.”
Warren and Chakarun agree the couple will need to run the numbers to see which scenario saves them the most money. “The short answer is, it will depend on your situation,” says Chakarun. “They may find it’s more beneficial to allow one to itemize and get the full benefit of the dedications,” says Warren, “and then the other taxpayer could take the standard deduction. So it really is a case-by-case basis.”
The good news, says Warren, is that you’ll still be able to E-File as a gay married couple. “We are working closely with the software developers. So many of the software packages out there will include a question that says ‘are you in a same sex union?’ and if so, it will help them re-compute their federal return for Idaho requirement, most of this will be completed through the computer process.”
But the Idaho State Tax Commission is not collecting information on who’s gay and married and who’s not. “Our returns do not collect gender,” says Warren. So a gay married couple may go through this entire process and the state won’t know they’re gay.
The Idaho State Tax Commission is posting the new rule on its website. And Chakarun and Warren encourage anyone with questions to contact the commission about their individual situation.
For Michael Chakarun and Doreen Warren, it’s not about policy. It’s about helping taxpayers swim their way through complicated state and federal laws. “We’re always reacting to legislative changes,” says Chakarun, “both at the state level and at the federal level when there’s a major tax change, so it’s kind of another day-in-the-life.”
Copyright 2013 Boise State Public Radio
