Love and marriage are in the air for thousands of same-sex couples in California, but as they consider whether to head to the altar, they need to be aware that their decision could have major financial impacts.
“There is enormous cause for joy, but before couples make hasty emotional decisions, they need to make sure they understand what marriage means to their personal finances,” says Certified Public Accountant Elisha Wiesenberg of Wiesenberg & Company, an L.A.-based tax preparer that specializes in tax issues regarding same-sex couples.
The Supreme Court’s decision should mean immense simplification of tax filing for same-sex couples, Wiesenberg says – but also raises a multitude of questions that have yet to be addressed by the Internal Revenue Service.
For instance, a cumbersome, frustrating process requiring California couples to first combine and then split their income should be eradicated. But how this will impact prior years’ taxes remains to be seen.
There are a host of ramifications stemming from last week’s repeal of the Defense of Marriage Act, including:
For all married same-sex couples in California, Federal tax reporting will change significantly, and in most cases will be simpler because same-sex filings will be the same as for any married couple, regardless of gender;
Couples should expect tax-preparation fees to go down, or to be able to prepare returns on their own;
In community property states like California, the IRS already recognized combined income, which created a favorable tax treatment – however, Federal recognition of marriage could subject couples to “marriage penalty” taxes, which can add thousands of dollars to tax bills each year.
In many cases, the recognition of marriage could put couples into a more favorable tax status; newly married couples should investigate amending as many past returns as possible to claim extra taxes they may have paid.
In addition, since 2007 California has required same-sex couples with Registered Domestic Partner (RDP) status to file taxes jointly. “There is uncertainty about what will happen to the RDP status, so couples who are registered in California should know there may be changes that impact them financially.”
Wiesenberg most important advice to same-sex couples: “Whether you’re thinking about getting married or maintaining your relationship status as it is, consult with a qualified tax adviser who understands the myriad financial issues same-sex couples face.”
For more information and to contact Elisha Wiesenberg with any questions, email John Singh at email@example.com