While Thursday’s decision to allow married gay couples to file their federal taxes jointly in every state will ease the burden in many households, it creates new complications for couples who live in states that don’t recognize their marriages.
The Internal Revenue Service and the U.S. Treasury issued the guidance to comply with Supreme Court’s 5-4 ruling in June that overturned the federal Defense of Marriage Act. Until the court’s decision, gay couples who lived in states that recognized their marriages could file their state taxes jointly but had to file their federal taxes separately.
Thursday’s decision ensures that these couples, at least, no longer have to file two different sets of returns.
“This ensures that those married couples are treated equally for federal tax purposes,” said Brian Moulton, legal director at the Human Rights Campaign, a gay rights group. “It doesn’t change anything for state tax purposes.”
Now, the situation is reversed: Gay couples in about half the states can file a joint federal tax return but likely must file separately at the state level, including in North Carolina, South Carolina, Georgia, Kentucky and Mississippi.
“If you are in a place where for federal purposes you are married and for state purposes are you single, you will have a more complicated life,” said Roberton Williams, a senior researcher at the Tax Policy Center, a think tank run jointly by the centrist Urban Institute and the center-left Brookings Institution.
Some states may choose to follow the IRS guidelines when it comes to state income taxes. Others may instruct gay couples to calculate their federal returns separately for the purpose of state filing or create a special form. Either way, it could mean more paperwork for taxpayers, tax preparers and state revenue departments.
“It is a new development,” Moulton said. “It may require, frankly, some trial and error with these state agencies.”
States only have a few months before the next tax year begins to figure out how to treat married same-sex couples.
“People need guidance,” said Susan Sommer, director of constitutional litigation at Lambda Legal, a gay rights group. “It remains to be seen how states will treat their state income taxes.”
Until that’s resolved, there could be a confusing patchwork of state policies.
“It’s going to be a mess, I don’t know how else to say it,” said Leslie McMillen, a tax preparer in Columbia, Mo., who cautioned it’s early to say too much about the new rules.
Married gay couples who live in the nine states that don’t have a state income tax won’t face any uncertainty, including Florida, Texas and Alaska. Couples in these states can file their federal taxes jointly, much as they’d be able to in California, New York or Massachusetts, where gay marriage is legal.
Some states that don’t recognize gay marriage do offer civil unions or domestic partnerships, but those unions won’t qualify for joint filing of federal taxes. However, Illinois, for example, treats gay marriages as civil unions and would allow couples to file state taxes jointly.
It’s also far from clear how married gay couples would file state taxes when they move from a state that recognizes their marriage to one that doesn’t – say, from Iowa to Missouri or from Washington to Idaho.
Any effort to recognize married gay couples for tax purposes will run into political roadblocks in many states. North Carolina was the most recent state to ban gay marriage in its constitution, and the Republicans who now dominate the state government likely want to keep it that way.
“It takes a long time to get any law passed,” said David Dracup, a certified public accountant in Raleigh, N.C.
Ultimately, Lambda Legal’s Sommer said, the IRS ruling puts pressure on more states to recognize married gay couples and, if legislatures don’t do it, courts might instead.
“It’s a problem of their making,” she said.