No Taxation Without Representation
How Unfairly are Non-Heterosexual Couples
Treated Because They are not Allowed
Access to Civil Marriage?
There’s no gay marriage on form 1040. The gay-marriage tax penalty - Unable to file joint tax returns, gay couples face bigger bills, hassles Courtesy of The Wall Street Journal's MarketWatch 28 February 2013, by Jonnelle Marte.
Courtesy of the Movement Advancement Project: Millions of American families led by parents who are lesbian, gay, bisexual or transgender (LGBT) face unequal and inflated tax burdens and tax filing so complicated even accountants cannot always advise them. Unequal Taxation and Undue Burdens for LGBT Families provides a groundbreaking, in-depth look at the income tax inequities faced by LGBT families. Co-authored by the Movement Advancement Project, Family Equality Council and the Center for American Progress, this companion study to All Children Matter: How Legal and Social Inequalities Hurt LGBT Families extends that report’s examination of how antiquated laws and stigma harm children living in LGBT families in America.
- Our life partner has no automatic right to our estate if we die without a will AND if she or he does win ownership, the estate, known in legalese as "gifts" or "bequests", is subject to taxes. Gifts and requests to married spouses are not taxed.
- If our life partner DOES will us their estate, even if we are legally married in the state we live in, because of DOMA, we pay huge inheritance taxes on the estate -- the IRS does not reconize our marriages or civil unions or domestic partnerships as long as DOMA stands. Windsor v. United States: Edie Windsor Challenges DOMA
- If we own a home before we meet our new life partner and later decide to transfer half to our partner, it is a gift which may be taxable.
- Our compensation package, when the value of fringe benefits is added in, is less than the compensation of a married person doing the same job, working the same hours, and receiving the same nominal pay. We have to pay income taxes on the value of the employer benefit to our partner, which a spouse avoids.
- Our life partner may have to fight to establish his/her right to buy insurance on our life, if the insurance company challenges the partner's insurable interest. The reason why partners might have to buy life insurance on the life of each other is because the estate is taxable and the survivor needs to have a source to pay those taxes without depleting the assets off of which the survivor must continue to live.
- We can be kicked out of our jointly owned home if a creditor of only one of us goes after the property, while the married spouse's interest in the property protects the home for the couple. This is a tax problem to the extent that we cannot make a transfer of the property to our life partner to avoid a possible creditor claim, because the transfer would be subject to a gift tax, while a similar transfer between spouses is not subject to a gift tax.
- We cannot use family limited partnerships to shield our assets the way every married family can. The family limited partnership works because the spouse is able to receive the income and pay taxes on the partnership income without having the income flow through the hands of the risk creator. If an unmarried gay person made a limited partnership with his/her life partner, the creation might result in a gift tax and the accrual of income would be taxable to the risk creator. If the life partner received the distributions, and paid the income tax, since it would be the tax liability of the risk creator, the payment would constitute a gift, which might be taxable.
- The deductible expenses of the one cannot shelter the income of the other.
- When our partner dies, we have to prove our ownership of every item in the household or we can face a tax bill and even total loss of the items to the partner's family. The deductible expenses of the one cannot shelter the income of the other.
- Gay people pay into the state tax system for benefits such as child welfare even though in many states they are prevented from having custody of children, becoming a foster parent, or adopting children.
Other Economic Disadvantages Affecting LGBTIQ People Due to Tax Inequality
- We cannot claim Social Security benefits through our partner's employment.
- If the owner of the homestead has to move permanently into a nursing home, the non-owning partner may have to leave the domicile they shared for decades to meet Medicaid's claims.
- We often have to pay more for ordinary transactions, such as renting a car or buying umbrella risk insurance.
- We cannot rollover our partner's retirement account into our own but must start drawing it down when a surviving spouse can wait until his or her own retirement age.
- When our partner dies, we receive no death benefit or continuation of the decedent's pension.
About the "Marriage Penalty" Tax
Increasingly seen as an unconscionable attack on marriage and the family, the "marriage penalty" tax is imposed on heterosexual couples who choose to marry. These couples are pushed into income brackets for which the benefits of marriage are reduced.
Although approximately 40% of married couples pay less tax than they would as separate individuals (through bonuses in the tax code), there are certain families hurt by the tax, namely, those where low and moderate-income spouses work. Two-earner families where both partners earn approximately the same amount and low-income families receiving housing benefits, food stamps and tax credits currently suffer from the "marriage penalty" tax.
In 2000, Both President Clinton and the Republican majority proposed legislation that would attempt to address this problem:
President Clinton's plan would have focused on raising the standard deduction for two-earner families, who suffer most from the marriage penalty, thus providing a tax cut of approximately $300 to $600, depending on the tax bracket. The House (and Republican party as a whole) supported giving a big tax cut to all married couples--even those who are benefiting from the existing tax code and not suffering at all from the "marriage penalty. Neither proposal took care of the problem of individuals who receive housing benefits/food stamps and decide to marry.
2010 I.R.S. "Income-Splitting" Change for Some RDP's and Married Same-Sex Couples
In May 2010 the Internal Revenue Service announced a change in its treatment of income earned by registered domestic partners (RDPs) in California. The IRS now applies California's community property laws to California RDPs the same way -- to reflect "income-splitting" for community property -- that it long has applied those laws to different-sex married couples in California who file their federal income tax returns separately. This change applies similarly to same-sex spouses in California and RDPs in Washington and Nevada.
Let's take a moment to informally re-visit 2010 when this change went into effect. The change was publicly announced and became a requirement, in the middle of tax season and before the I.R.S. had created forms to comply correctly with the new requirement, and before they had trained I.R.S representatives that #1 the new change existed, and #2 how to answer questions called in by the bewildered public. The result was mass confusion on the part of both the public and I.R.S. employees. It was instantly impossible for same-sex married couples or RDP's in CA, WA, and NV to file online because there was no way to comply with the law using the online forms that were available. Couples had to fill out their tax forms and submit them to the feds with personal statements explaining the income they were reporting and who the other person involved was, since no appropriate forms existed making it possible to list both members of a couple. Thankfully the LGBTIQ community, tax and legal experts, rose to the occasion and began holding workshops and seminars and providing as much guidance via online sources as possible. However, the experience will not be forgotten by many!
Be Sure to Check Your Resources Before Filing Your Taxes!
We strongly encourage all LGBTIQ couples to carefully check the state tax regulations and the current I.R.S. regulations that apply in the state where they file before beginning the process of filing their taxes each year.
In addition to taxes, we cannot emphasize strongly enough how important it is for LGBTIQ couples to have complete paperwork in place to protect themselves as much as possible. Nerdwallet provides a Same-Sex Planning Tool that my be helpful.
Why We're Demanding Access to Civil Marriage
If the marriage penalty is eased, we will likely, through discrimination in marriage, pay an even greater portion of taxes. If couples are getting tax breaks, those who file as singles (us) will have to pay an even greater disproportionate share. Even by paying more taxes, married couples still benefit from access to civil marriage in a myriad of ways such as social security, family protection, etc., etc. These benefits and privileges significantly outweigh the tax burdens that accompany legalized marriage. Same-sex couples deserve the opportunity to have equal access to perks as well as penalties.
TAX SEASON ACTIVISM
TAX DAY WILL OCCUR ON TUESDAY, APRIL 15, 2014
As millions of Americans file their income taxes, members of Marriage Equality USA will hold their annual Tax Day Protests at local U.S. Post Offices across the country. These actions call attention to the tax inequities faced by same-sex couples as a result of the state and federal laws that refuse to recognize or extend civil marriage protections to same-sex couples. These events highlight the ongoing moral and financial costs of denying marriage equality to same-sex couples -- as well as the consequences paid by all Americans as a result of these discriminatory state and federal laws.
Refuse to Lie Campaign
Each year the federal government demands that thousands of gay married couples lie. Across the country, legally married gay couples are taking a stand. We are refusing to lie about the fact that we are married: http://refusetolie.org/