BY AJ TRAGER
DETROIT — April 18 is tax day, and many LGBT individuals from around the country will find this year's tax return a little different from previous years.
Last year, married LGBT couples living in Michigan were required to file up to five tax returns: one federal tax return and multiple state returns. With marriage equality now legal nationwide, forcing Michigan to recognize same-sex marriages, married LGBT couples can now file jointly in states like Michigan that didn't previously recognize LGBT unions.
BTL reached out to local tax professionals and accountants to get the scoop on what has changed for LGBT married couples with less than two months until deadline.
Couples that are just cohabiting and are not married should continue filing separate returns; however, if married, one cannot file a single tax return. If the parties do not want to file a joint return, another option is to file married filing separate, which does not incur the same tax rate as two individuals who are single. "The MFS status has a less favorable tax rate than filing single," Diane Harbour owner of Harbour Tax and Accounting said.
"Whether or not to get married is a very personal decision, and as a tax preparer and consultant, I would never consider giving advice as to whether one should marry or not. I would, however, explain to the couple that once you are married you may not file 'single' on your tax return. Taxpayers need to understand going into a marriage that there is a 'Marriage Penalty' to consider as far as their taxes are concerned," Kathy Mazzara, owner of Briggs Tax Service, told BTL.
For married couples, the only options for filing taxes are married filing separate or married filing joint. The decision to file one way or the other depends on the couple's particular tax situation. For instance, married filing separate is the least beneficial tax treatment, and the couple needs to consider the possibility of losses or losing some credits.
An example of this would be if a couple has student loan interest, tuition from secondary education or tax free U.S. bonds; the credit or deduction they may have been entitled to as MFJ status gets lost when filing for MFS, Mazzara explains. Taxes get even murkier when Social Security is taken into consideration. In some instances, a taxpayer may be responsible for repaying taxes up to 85 percent of their Social Security payments, depending on the amount of additional income the taxpayer has.
Mazzara and Harbour both suggest that couples come in to see a tax specialist or accountant with help filing their 2015 taxes. Other scenarios such as medical expenses, prior taxes due, child support, etc., can affect how a taxpayer files their return. It may be advantageous for a couple to file MFS to keep each other's funds separate, or it may not — every scenario is different.
Mazzara says that the process of filing taxes, while revolutionary for same-sex couples, is not rich in sentimentality.
"Filing your tax return doesn't seem to be a very emotional matter," Mazzara said. "The clients that I have that are LGBT have discussed their situations with me, we ran the numbers on which would be the most financially advantageous to them and filed the return. I have not experienced sentimentality in being able to finally file as a married couple."
Harbour has a different experience — she's witnessed couples be thrilled when they walk into her office during this year's tax season.
"For so many reasons it is related to the fact that they have children. Sometimes there is that spouse that isn't working and if they had no income in the past, they weren't being claimed at all because they weren't married. The clients are thrilled that we have this right to file jointly. I think some of the clients realized that they will eventually be able to share Social Security benefits and other things of that nature," Harbour said.
As the end of the tax season approaches, both Harbour and Mazzara caution LGBT couples against filing jointly because they can. It's an emotional situation to finally file jointly after living together for possibly 40 years, however, each situation is different and there are plenty of LGBT inclusive tax professionals prepared to help LGBT couples.
LGBT individuals are disproportionately affected by poverty and are often times the most in need of income tax information. For help with 2015 taxes, the National LGBT Task Force has launched a preparation guide for LGBT individuals. The new resource is intended to guide LGBT people with questions they might want to ask when sitting in front of their tax preparer or program. This resource is the first-of-its-kind guide aimed to help the LGBT community navigate the credits and deductions that can greatly affect someone's return on taxes.
To access the taxpayer guide, visit http://queerourtaxes.org.
