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Friday, September 20, 2013

Weekly Round-Up: States Begin Issuing Individual Income Tax Filing Guidance for Same-Sex Couples

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States have begun issuing individual income tax filing guidance for same-sex couples, Bloomberg BNA State Tax Law Editor Melissa Fernley writes in this week's issue of the Weekly State Tax Report.

Same-sex couples must file their Colorado income tax returns using the same filing status as they claim for federal purposes, the Colorado Department of Revenue clarified in its guidance on the recent IRS ruling.

Colorado has always required its residents to file state tax returns using the same filing status as was claimed on the federal return. However, since Colorado does not recognize same-sex marriage, it was unclear whether they would allow same-sex couples to file jointly, even if they were able to do so for federal purposes.

Other states which do not recognize same-sex marriage have taken varying routes. Louisiana will require same-sex couples which are eligible for joint federal filing to still file separate individual returns at the state level, the department noted in Revenue Information Bulletin 13-024. Because Louisiana begins its calculation of state income from federal adjusted gross income, same-sex couples filing taxes in Louisiana will need to create a pro forma federal return in order to calculate state income tax.

Wisconsin has decided to create new tax form Schedule S, Allocation of Income to be Reported by Same-Sex Couples Filing a Joint Federal Return. The schedule is required for same-sex taxpayers filing their 2012 federal income tax return using a filing status of married filing jointly, and filing original federal and Wisconsin returns with the state on or after Sept. 16, 2013. Each individual will need to file a separate Wisconsin income tax return using the filing status of single or head of household, and add Schedule S, which will allocate the income reported on the joint federal return.

States which allow same-sex couples to marry in the state are also releasing information, elaborating on IRS Revenue Ruling 2013-17 by providing guidance on amended returns and refunds. New York released TSB-M-13(5)I, (10)M, which clarifies that the personal income tax returns of same-sex couples may be amended by applying the federal rules in effect for married taxpayers in the same year. Amended returns may only be filed for years eligible under the statute of limitation, which is generally three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Same-sex married couples must file their 2011 and 2012 tax returns using a married filing status even if they filed that year's federal return as single or head of household.

Text of the Colorado notice is available at http://www.colorado.gov/cs/Satellite/Revenue/REVX/1251645922423.

Text of the Louisiana Information Bulletin is available at http://www.rev.state.la.us/forms/lawspolicies/RIB%2013-024.pdf.

Text of the Wisconsin notice is available at http://www.revenue.wi.gov/taxpro/news/130906.html.

Text of the New York technical memorandum is available at http://www.tax.ny.gov/pdf/memos/multitax/m13_5i_10m.pdf.

Text of the IRS ruling is available at http://www.irs.gov/uac/Newsroom/Treasury-and-IRS-Announce-That-All-Legal-Same-Sex-Marriages-Will-Be-Recognized-For-Federal-Tax-Purposes;-Ruling-Provides-Certainty,-Benefits-and-Protections-Under-Federal-Tax-Law-for-Same-Sex-Married-Couples.

Article written by Melissa Fernley, State Tax Law Editor at Bloomberg BNA.

In other developments…

Treasury and IRS Adopt "State of Celebration" Rule for Same-Sex Marriages-Implications for Employee Benefit Plans, a new alert by Pillsbury

IRS Clarifies Tax Treatment of Same-Sex Spouses, by Bradley Arant Boult Cummings LLP

Los Angeles Business Tax amnesty program announced, a new alert by PwC

Nexus Created Through Ownership in Pass-Through Entities, Ohio's State Tax Blog explains

Compiled by Priya D. Nair
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