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Gay couples struggle with finances after DOMA repeal

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Author Topic: Gay couples struggle with finances after DOMA repeal  (Read 444 times)
Psalm 51:17
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« on: June 27, 2014, 10:00:54 pm »

Gay couples struggle with finances after DOMA repeal
http://www.today.com/money/gay-couples-struggle-finances-after-doma-repeal-1d79857090
6/26/14

Since the Supreme Court struck down a ban a year ago, getting married has become a whole lot easier for same-sex couples. Managing their finances, though, remains a challenge.

When the Supreme Court repealed the Defense of Marriage Act in June 2013, roughly 215 financial planners were certified by the College for Financial Planning to advise on issues pertinent to same-sex couples. Although that number of Accredited Domestic Partnership Advisors (ADPA) has more than doubled in the last year, enrollment in these programs may have tapered off.

"Many potential students may have thought that there was no further need for alternate planning," said Gregg Parish, professor of estate planning at the college. "Nothing could be further from the truth."

A recent Wells Fargo survey found that two-thirds of respondents in legal same-sex marriages still did not understand fully how federal and state laws affect them.

For instance, the federal government recognizes same-sex marriage, but benefits under Medicaid, Medicare and Social Security are yet to apply. And while same-sex marriage is legal in 19 states and the District of Columbia, restrictions in other states have made for a complicated web of compliance with local tax, insurance and inheritance laws.

Jenny Hatch founded Christopher Street Financial in the early 1980s to advise same-sex couples on financial issues. There have been some easy fixes for lesbian, gay, bisexual and transgender clients.

"It's been a slam dunk for some people to go back and refile taxes," she told CNBC. Yet, Hatch notes challenges have grown for those in states where marriage is still not yet legal.

"We have clients coming from Florida to New York, asking, 'Should we get married while we're in New York?'" Hatch said. "In some cases," like those dealing with steep medical costs or being unable to stomach a potentially large marriage tax penalty, "the answer is no."

Debra Abbott-Walker of Prudential's New York Agency said her clients' interests are shifting from traditional retirement planning to products like life insurance.

"As of recently, they're thinking about having children," Abbott-Walker told CNBC. "So they're making sure, 'Do we have necessary funds should something happen?'"

Neither Hatch nor Abbott-Walker has the ADPA accreditation, mainly because they've each already been doing the work for several decades.

Abbott-Walker, who lives in Connecticut with her wife and two young sons, has the benefit of knowing the issues firsthand. The Wells Fargo survey said that more than accreditation, some 52 percent of same-sex couples surveyed by Wells Fargo preferred to work with advisers who are LGBT themselves.

    "We have clients coming from Florida to New York, asking, 'Should we get married while we're in New York?' In some cases the answer is no."

Still, accreditation is imperative for advisers new to LGBT issues looking to build a client base with the U.S. LGBT community, which Witeck Communications estimated to have $830 billion in buying power in November 2013.

To gain an edge, big banks have encouraged and even subsidized enrollment in these programs. As of this week, Wells Fargo counted more than 100 ADPA-certified advisers; Merrill Lynch has more than 60, in addition to "hundreds" developing similar skills; and Morgan Stanley Wealth Management had 31 advisers with the ADPA certification.

As new laws take shape and new changes befall same-sex couples, banks are refining their businesses to address these needs and beckon to the LGBT community. Some Morgan Stanley advisers have taken to Twitter with what appeared to be a company-sanctioned message that the bank is "proud to recognize #PrideMonth #LGBT."
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« Reply #1 on: February 17, 2015, 07:34:35 pm »

http://www.bloomberg.com/news/articles/2015-02-17/gay-couples-tax-season-nightmares-continue?cmpid=yhoo
2/17/15
Gay Couples’ Tax-Season Nightmares Continue
Some married couples must file five returns this year


Tonya Keith typically spends four to eight hours doing her taxes each year. This year, she says, “I’ve got about 30 hours in, and I’m not done.” The reason: She and her wife got married last year in Seattle, but they live in Georgia, which doesn’t recognize their marriage.

This tax season is particularly bitter for gays and lesbians who live in states that still don’t recognize same-sex marriage. After decades together, many are filing their first joint tax returns. In a growing number of states, this is easy: An additional 20 states have legalized same-sex marriage since the beginning of 2014. But in Georgia, Michigan, Ohio, and nine other states, gay couples are still treated as legal strangers. They face extra paperwork, heftier tax-prep fees, and tax questions that puzzle even the experts. Relief could come from the U.S. Supreme Court, which is expected to rule by June whether gays and lesbians have a right to marry. Taxes, however, are due by April 15.

Of course, much more than taxes is at stake in front of the Supreme Court—adoption rights, inheritance law, survivor benefits, the right to make medical-care decisions for a sick spouse, and more—but tax season brings the confusing and complicated contradictions between state policy and federal law into sharp relief. Keith and other gay married couples must prepare five returns: First, they complete a joint, official federal return that they’ll file with the IRS. Then, they must each fill out—but not file—a federal return as if they were single people, shadow returns they’ll use to prepare their state tax returns.

Filing a joint federal return is easy. The difficulty is properly dividing a married couple’s entwined finances into two state and federal returns. It’s like “unscrambling an egg,” says Ohio resident Sandra Anderson, who married her wife in August after 22 years together. A charitable deduction, for example, is split evenly between spouses if it’s made from a joint bank account, but if it’s made via credit card, only one spouse can claim it.

If a couple has children, things get even more complicated. Deductions for dependent children and adoption and child-care credits must be allocated correctly between their parents. Each state can have slightly different rules, but, when asked about them, state employees don’t always give consistent answers. Keith spent a week trying to figure out whether she and her wife should file on their state return as “single” or “head of household,” and they kept getting different answers. It turns out they each claim “head of household” status, because each of them claims dependent children.

Then there’s the insult of filing a legal document that says you’re single when you’re not. At HLM Financial Group, an Atlanta firm that specializes in LGBT clients, customers insisted on writing in large red letters on the top of their state returns: “Filed under protest. Taxpayer is not single.”

If the Supreme Court rules that gay and lesbian couples have a right to marry in all 50 states, these problems go away. Gay married couples could file for an extension until Oct. 15, at which point their tax situations could be a lot clearer. Any tax due must be paid by April 15, but otherwise there’s no penalty for a delay. “If it were me, I’d file the extension,” says Lynn Pasqualetti, managing partner at HLM.

Keith won’t be doing so. She and her wife are expecting an $8,800 federal refund. “There’s been a lot of wine devoted to this tax return,” she says, and at this point she’d just like to get it over with.
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« Reply #2 on: April 11, 2015, 03:29:29 pm »

http://news.yahoo.com/tax-day-extra-difficult-many-same-sex-married-130934748.html
4/11/15
Tax Day extra difficult for many same-sex married couples

WASHINGTON (AP) — A necessary burden for most Americans, Tax Day is an accounting nightmare for thousands of gay and lesbian couples as they wrestle with the uneven legal status of same-sex marriage in the United States.

They live in a country that recognizes their marriages, but some reside in the 13 states that do not, an issue that will be argued before the Supreme Court later this month.

At tax time, and Wednesday is the filing deadline, it gets complicated because most state income tax returns use information from a taxpayer's federal return.

Straight couples simply copy numbers from one form to another. But that doesn't work for same-sex couples reporting combined incomes, deductions and exemptions on their federal tax returns. These couples must untangle their finances on their state returns, where they are still considered single.

"We're adults, we're contributing to the welfare of society and yet, here's this one thing that just reaches up every year and kind of slaps us in the face," said Brian Wilbert, an Episcopal priest who lives in Oberlin, a small college town in northern Ohio.

Wilbert married his husband, Yorki Encalada, in 2012, at a ceremony in upstate New York. He is filing a joint federal tax return for the second time this year. But Ohio, which doesn't recognize same-sex marriages, requires the couple to file their state tax returns as if they were single.

"It may not be the most burning thing," Wilbert said. "But as we think about equality and marriage equality, this is an important thing because it's part of what couples do."

The number of states that recognize same-sex marriages has grown to 37, plus the District of Columbia, since the Supreme Court struck down part of the federal Defense of Marriage Act in 2013.

After the ruling, the IRS announced that it would recognize same-sex marriages for federal tax purposes, even if couples lived in states that did not.

The Supreme Court is scheduled hear arguments in another same-sex marriage case April 28. Advocates hope the court will compel the remaining states to recognize gay and lesbian marriages.

Opponents of same-sex marriage want the court to send the issue back to the states. They note that recognition of same-sex marriage has spread largely through court orders, rather than the ballot box.

"It's not about the rights of a handful of people who want to change the institution of marriage," said Phil Burress of Citizens for Community Values, an Ohio group. "It's about the will of the people."

The benefits of marriage are a mixed bag when it comes to taxes. Some couples, especially those with disparate incomes, can lower their combined tax bills by getting married. Others pay a marriage penalty.

The vast majority of married couples in the U.S. file joint federal tax returns in which they combine their incomes, exemptions, deductions and credits to calculate their tax liability. But same-sex couples are not allowed to file joint tax returns in most states that don't recognize their marriages. Instead, they have to unravel their finances and file separate state returns.

"So you have this one return that would normally give you the numbers to do your state tax return, but instead you have to split all your incomes again and pretend like you're not married," said Deb L. Kinney, a partner at the law firm of Johnston, Kinney & Zulaica in San Francisco.

"Your health care benefits will be taxed differently and your credits will be different. Your interest deduction could be different, and then you have to go through the allocation on each return," Kinney said. "It's much more expensive and cumbersome."

With the tax filing deadline approaching on Wednesday, states that don't recognize same-sex marriages are dealing with these issues in different ways. Five states require same-sex couples to fill out multiple federal tax returns, sometimes called dummy returns, so they can come up with the appropriate numbers for their state returns. This is how it works in Georgia, Kentucky, Louisiana, Michigan and Nebraska.

First, a same-sex couple fills out a joint federal income tax return, just like any other married couple. This is the return they file with the IRS.

Next, each spouse fills out a separate federal return as if the filer was single. Information from these returns is used to fill out state income tax returns, which are filed as if each was single.

"You have to literally make out five returns and file three," said Scott Squillace, a tax lawyer who wrote a legal guide for gay and lesbian couples called, "Whether To Wed."

"It's dizzying."

There's more.

"If someone with a joint bank account writes a check for a charitable donation, the question is, do you split it 50-50? Or is it that person's deduction when they file a single return?" said Arianne Plasencia, a tax lawyer at the Carlton Fields law firm in Miami.

Kansas, North Dakota and Ohio take a different approach. These states provide worksheets that same-sex couples must complete to separate their finances. In Ohio, the form has 31 lines, though most couples don't need to fill out every line.

"There is no way that I, as a Joe Q. Public, who happens to be gay and in a same-gender marriage, would figure out how to fill this form out," said Wilbert, the Episcopal priest. "I mean, it's just impossible."

Wilbert said he had to hire an accountant to do his taxes for the first time in his life. "I also had to get an extension, which I never had to do."

The issue is moot in South Dakota because there is no state income tax. It's less of an issue in Arkansas and Mississippi because these states don't use information from federal returns on their state income tax forms.

Alabama has same-sex married couples divide the income and taxes they report on their federal returns, based on each spouses' share of their combined income.

Missouri doesn't recognize same-sex marriages, but Gov. Jay Nixon issued an executive order requiring gay and lesbian couples to file joint state tax returns if they file a joint federal return.

This is much simpler than in other states. But what if filing as a married couple causes your taxes to go up?

"For the people it hurts, how unfair," said Janis Cowhey, a law partner at the Marcum accounting firm in New York. "You won't recognize my marriage, but you're going to make me pay more in taxes because I got married somewhere else."
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