When Annie McPheeters and Meredith Johnson got married at South Portland City Hall on Dec. 29, they barely considered the complications they would face when filing tax returns as a newly married, same-sex couple.
“In the back of my mind, I knew it would be trickier,” Johnson said.
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But just weeks after getting married, McPheeters and Johnson hired an accountant for the first time to help them sort through the quirks of filing under their new status.
For Mainers in their situation, filing taxes is not just an annoying task. It’s complicated by the fact that they are considered married by the state and single at the federal level, where same-sex marriage is not recognized. The distinction could add hundreds of dollars to a couple’s federal tax obligation.
The issue comes to the forefront Wednesday as the U.S. Supreme Court hears oral arguments in a case challenging the federal Defense of Marriage Act, dubbed DOMA, which defines marriage as solely between a man and a woman.
Because federal law does not recognize same-sex marriage, same-sex couples can’t file federal returns jointly, even if the state in which they live recognizes their union.
A ruling in the case could come as early as June. Overturning the law could have wide-ranging effects on the finances of same-sex couples. There are more than 1,100 separate federal provisions that address marital status, including more than 200 provisions in the tax code alone, accountants said.
“It’s a quirky situation. It feels a little funny,” said Donna Galluzzo, who married her partner of three years, Lisa Gorney, shortly after midnight on Dec. 29 in Portland.
Because same-sex couples cannot file joint federal returns, they are prevented from combining incomes and deductions. So depending on their incomes, they could face higher tax rates and greater expenses, accountants said.
Consider, for example, a same-sex couple with no children who take the standard deduction on combined earnings of $100,000, with one partner earning $70,000 and the other earning $30,000.
If allowed to file jointly as a married couple, the couple’s tax obligation, after a standard deduction of $11,100, would be $14,091, according to tax tables on the IRS website.
But because they would have to file individually, the couple’s combined obligation — after each takes a standard deduction of $5,950 — would be $15,225, a difference of more than $1,100.
The difference is less pronounced if each person earns similar amounts, according to the IRS website.
In addition to different tax bills, same same-sex couples also have a few extra steps to go through.
“Taxes aren’t super sexy, but you have to figure it out,” Galluzzo said. “It’s something different for us. It’s not the classic male-female marriage.”
Since the state tax filing is calculated based on the federal return, a same-sex couple must create a separate federal return as if they were married. That allows them to determine their federally adjusted gross income to use on their state returns. The separate return doesn’t get filed with the federal government.
The couple has to file their actual federal returns as single individuals, said Kathleen DeBaker, senior tax adviser with H&R Block in Portland.
“It’s one extra small step, but it’s definitely an odd step, having to do each differently,” McPheeters said.
Lisa Ward and Mel Cloutier of Lisbon had a wedding ceremony on Dec. 31 with a handful of family and close friends in front of town hall. Because of a clerk’s error, however, their marriage wasn’t official until 2013.
“We actually thought about taxes and legal issues and wanted to get married in 2012, in part because of that,” Ward said. “We were disappointed and the clerk could not have been more apologetic. We understood. But it was disappointing since we were so excited to finally get married.”
Even though they were not technically married in 2012, Ward and Cloutier decided to practice doing their taxes as a married couple just so they would be prepared for next year’s filing. The couple was surprised to learn they would have had to pay more to the state had they actually been married in 2012.
“The money was never the point. We just wanted to be married,” Ward said.
The different filing requirements between the state and federal systems “feels wrong. It’s unfair. I know life is unfair, but still, it’s just not right,” Ward said.
Lambda Legal, the lesbian, gay, bisexual and transgender advocacy organization, recommended that if a couple is legally married on the state level, they should make a note on their federal tax return that their federal “single” filing status is based solely on DOMA, and that they are not lying or filing fraudulent papers by not filing as married.
Nine states, including Maine, and the District of Columbia allow gay marriage. Colorado recently passed a measure to allow civil unions, putting it on track to join a dozen other states with civil unions or similar laws.
H&R Block began training its staff in Maine in the fall — before the vote on same-sex marriage took place — just in case there was a change in the law. Staffers took online training tutorials to make sure they were ready to answer questions as soon as the law took effect, DeBaker said.
About 150 same-sex couples have exchanged vows in Maine since same-sex marriage became legal Dec. 29, but the number of same-sex couples facing tax complications is larger, accountants said.
“It’s not just the people who got married at the end of the year. If people got married in other states before and now live here, they are now recognized in the state of Maine,” DeBaker said. “A lot of people don’t realize it’s a bigger pool than those who got married at the end of last year.”
DeBaker said people who were married in other states before 2009 should file amended returns for 2009 just in case the Supreme Court overturns DOMA. Taxes can be amended for three years, so 2009 is the first year available to resubmit.
If DOMA is overturned, the amended tax forms would be processed. If DOMA stands, the filings would be shredded, DeBaker said.
Same-sex couples also should adjust their W-4 forms with employers so their payroll deductions reflect their marriage on the state level, DeBaker said. The federal withholding amount would remain the same unless DOMA rules change.
“Hopefully, this will be the only year in Maine that we’ll have to do this,” said Johnson, the South Portland newlywed. “Things could change.”
Jessica Hall can be contacted at 791-6316 or at:
jhall@pressherald.com
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