California Registered Domestic Partners Must File Married Tax Returns
Beginning January 1st, 2007 California tax law requires registered domestic partners to use the same filing status as married couples. This is a moment many of us have been waiting for. Our unions are recognized by a taxing authority! This changes the way 40,000+ registered domestic partners in California will file their 2008 tax returns. Carefully handling our money and financial records this upcoming year is crucial. The change in filing status can have negative implications like potentially triggering state audits, changes in your tax liabilities, and liability for your partner’s debts.
The logistics of these filing status changes are starting to surface. A focus group has been meeting to discuss how California tax payers and tax professionals will be affected. As a tax preparer, I can tell you that we have received little, and in some cases no guidance on the changes. In fact, the Franchise Tax Board has yet to update their website. It still states domestic partners cannot file a married filing joint.
So, how will filing as married work? Take my partner and me as an example:
1. I’ll complete, and actually file, two federal returns–one for each of us as single. No changes here.
2. Then I’ll prepare, but never file, a federal return combining our income as if our marriage was recognized by the IRS. A faux return if you will.
3. From the faux married federal return, I’ll transfer the relevant data to a married state return.
Instead of filing two federal and two state returns, we’ll file two federal and one state. But I’ll still have to prepare a fourth return, the faux federal return, which never gets mailed and filed! This may increase the amount of time it takes to prepare domestic partnership state tax returns. Your tax preparer may charge more than usual to complete your returns.
The main problems arise from the faux federal return because we are trying to comply with differing federal and state laws. The figures on our actual federal returns will look very different than our state returns. Often California requires us to attach a copy of our federal return with our state returns. Now will they require the legit federal and our faux federal returns?
The ramifications of the change will be as unique as your financial position. Some influential factors are:
Do you and your partner own property?
Are you parents?
Do you have an estate plan?
As changes go, this will not be simple or easy. There will be many questions and scenarios to examine. Regardless of who prepares them, your taxes are ultimately your responsibility. Understand the importance of the change and research how it will affect you. Consult with your tax professional. If you do not have 100% confidence in your tax preparer consider, searching for someone else.
If you have specific questions about your taxes, contact me for a complimentary consultation.
Great article (and hooray for progress) but dismayed that we are now in the dark woods in terms of conflicting federal/state tax issues. I don’t live in California anymore, but New Jersey is set this week to act in a similar way, recognizing domestic parnters as “married” (in all but name) in the state. I would assume changes to state taxes for domestic partners in NJ won’t be far behind.
Maybe you’ll consider a regular series on this, sharing how it’s going as you proceed? Could be helpful learning for all of us here!
This will be argued in court at some point. I’m a registered domestic partner, not “married” and will not file as such. Change the form to recognize the separate but equal status and I may file as they wish or let me marry.
This new California law is not all that it seems. For instance, in san diego, I own property but if I transfer it to my registered domestic partner, the tax assessor will re-value the property and the taxes will go up dramatically. We do not have the same right as husband and wife with respect to real estate transfers. I have verified this with the tax assessor. So, why should I have to file as married – and pay more taxes but not get the same treatment as married? Simple – those that tax us don’t really care about what is fair – they only care about taking money from our wallets and they use every loophole possible to do it – fair or not fair.
If I have to file as married, I should get the same benefits as married – no ands, ifs or buts.
This new law will just result in disolution of domestic partners – mine included. The state has found a way to cheat us out of our rights but still tax us as if we had those rights.
Anyone from the San Diego tax assessor’s office care to comment on this? You know I’m right – I’ve been to your office and I’ve read your official statement regarding this very subject. You are cheating us.
Your county assessor is incorrect. The law is very clear that a transfer between registered domestic partners is not considered a change in ownership that requires reassessment.
For example, see http://www.boe.ca.gov/proptaxes/pdf/lta05062.pdf .
Does anyone know of a tax attorney or preparer who is familiar with tax implications for registered domestic partners and the federal versus state implications for transfers of assets? If so, please post.
Vicky, Thank you for the website! We are looking for a good attorney who is familiar with RDP too.
Hi Vicky,
Interesting article. I have a question for you. My partner and I are filing a CA joint for the first time. I checked our joint refund against what we would get filing seperately and found the joint refunt $1700 less. Is this to be expected?
Warren
The IRS e-flie system is now open, most W-2s and 1099s will be in mail in the next couple of weeks. Is everybody ready for tax time?
is your partner responsible for the other bad credit or I guess i should say if they have credit people after you for a deliquent account if your a registered partner???