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.
(More: As more states recognize gay marriage, planning traps still await couples)
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.
Ms. 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. Ms. 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.
(More: Obama backs Social Security spousal benefits for same-sex couples)
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.
Ms. 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.
