In a series of questions and answers, the IRS has provided tax return filing information for registered domestic partners in California, Nevada and Washington and same-sex spouses in California. These are all community states.
Federal tax law respects the state law characterization of income as community property. Therefore, registered domestic partners and same-sex spouses in these states must each report one-half of all community property income on their federal income tax return. Each partner receives a credit for one-half of any tax that is withheld on wages that are treated as community property under state law. Reporting of community income in this manner is mandatory beginning with the 2010 tax year. If taxpayers wish to do so, they may amend prior years' returns to report in accordance with these new guidelines; however, amending is not mandatory. California has recognized the community property rights of registered domestic partners since 2007, so returns filed for that year or any later year could be amended if the statute of limitations has not closed.
While the IRS requires each partner to report one-half of the community income, the partners are not permitted to file either joint returns or married filing separate returns. These filing categories are determined under federal law, which pursuant to the Defense of Marriage Act ("DOMA"), currently does not recognize either registered domestic partners or same-sex marriages. DOMA, however, is under attack on constitutional grounds in several courts. In April (Vol. 6 No.1), we reported that the United States Department of Justice issued a statement in February that it would no longer defend the constitutionality of DOMA in the courts. We will keep you apprised of the status of DOMA as it affects tax planning.
The questions and answers contain information on a variety of related subjects including the availability of the dependency exemption for a partner or a child of a partner. The partners are also permitted to make different choices on itemizing deductions versus claiming the standard deduction. If this subject is of interest to you, the full text of the questions and answers can be accessed on the IRS website using the following link: http://www.irs.gov/newsroom/article/0,,id=245869,00.html. IRS Publication 555 also contains tax information for registered domestic partners.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.