Ari Ezra Waldman | DOMA | Gay Marriage | Law - Gay, LGBT | News

The Gay Tax

BY ARI EZRA WALDMAN

Ari Ezra Waldman is a 2002 graduate of Harvard College and a 2005 graduate of Harvard Law School. After practicing in New York for five years and clerking at a federal appellate court in Washington, D.C., Ari is now on the faculty at California Western School of Law in San Diego, California. His research focuses on gay rights and the First Amendment. Ari will be writing weekly posts on law and various LGBT issues. 

Follow Ari on Twitter at @ariezrawaldman.

Refusetolie It has long been part of the meme of the gay rights movement that, in effect, the United States taxes homosexuality. Various state and federal laws tend to create extra costs for single, partnered and married gays and lesbians by dancing a discriminatory two-step: There is no direct "gay tax" -- that would be grossly unlawful -- but many laws do not recognize gay relationships, making us strangers to thousands of state and federal benefits that our heterosexual friends take for granted.

With our 2010 taxes due in a few days, an activist organization called "Refuse to Lie" has taken this problem by the horns. The organization has asked gay couples to consider the following paradox: Federal law makes it illegal to lie on tax forms, and yet when a legally married same-sex couple files as two separate single individuals, as the Defense of Marriage Act (DOMA) requires, the two partners are lying.

But, flouting federal tax law by filing as a gay married couple is a risky prescription, even for those willing to fight for our rights in the trenches. Violating federal law is not like getting arrested at a sit in and spending a few hours in the clink. It can result in fines, other financial penalties, audits, opportunity costs and significant jail time. Is it worth it?

Let's consider what the law is and then tell us how you will be filing your federal taxes,
AFTER THE JUMP...

To be fair, "Refuse to Lie" is responsible enough to warn gays and lesbians up front that they cannot file as married for federal purposes even if they are legally married. DOMA excludes gays from the federal definition of marriage, so as far as the Internal Revenue Service (IRS) is concerned, gay couples cannot ever be "married." So, the first suggestion from "Refuse to Lie" is to file as single, put an asterisk next to it and supplement your filing with a note that says that you are filing as single under protest and that by stating you are single, you are in no way disavowing your lawful marriage. It's a good idea: It raises symbolic opposition without putting you at risk for penalties.

Tax "Refuse to Lie" also notes that Section 6664(c) of the Internal Revenue Code provides that "no penalty shall be imposed [for the underpayment of tax] if ... there was a reasonable cause for [the underpayment] and the taxpayer acted in good faith...." In other words, you cannot be penalized for paying less if you had a valid reason to believe you could pay less than you owed. You could argue that Judge Joseph Tauro's 2010 decision declaring DOMA unconstitutional and President Obama's decision to stop defending DOMA in federal court are sufficiently reasonable bases for believing that DOMA is indeed unconstitutional and should not force you to pay higher taxes. However, a district court decision and the Obama Administration's legal strategy are far cries from a clear indication of the end of DOMA. It occurs to me that gay married couples in Massachusetts, where Judge Tauro sits, have a more reasonable, good faith belief that DOMA no longer applies to them, but since the cases are on appeal, they are hardly definitive rulings.

There are other options: File both a joint and single return, pay the single amount and declare your reasonable, good faith belief that DOMA does not apply anymore and ask for a refund. You could also file single returns, then file an amended joint return along with an IRS 843 (request for abatement or refund) based on the unconstitutionality of DOMA.

Gay couples taking these actions would not be the first couples of challenge federal tax laws they find unfair or unreasonably penalizing married couples. Some years ago, a couple challenged the so-called "marriage penalty," which is the increasingly common phenomenon that married individuals, both of whom work, pay more federal taxes when they file jointly than when they file single. This couple refused to pay the "penalty," challenging the constitutionality of the applicable federal law, but a federal appellate court upheld the law. The couple not only had to pay the "penalty," but also late fines, a higher bill to their tax preparer and significant emotional and opportunity costs for going through an always trying conflict with the IRS.

At bottom, the "Refuse to Lie" campaign is a campaign for the wealthy, for people who are willing to give up time, money and energy, and willing to risk high fines and a large bill from an accountant, in order to make a statement about the validity of their marriage and all same-sex unions. Couples of lesser means do not have the opportunity to join this fight, except to file their taxes individually and include a symbolic note that their filings do not disavow their state sanctioned marriage. And, it would be difficult to base any underpayment on the current state of the DOMA cases, which means that even wealthier couples ready for a fight are not just risking a battle, but are going to get one.

I recommend you consult your tax preparer before making any decision and before making even symbolic statements to the IRS.

How do you plan on filing? What considerations are you factoring into your decision? What do you think of the "Refuse to Lie" campaign?

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Comments

  1. "Refuse to Die" ? Is this what we are facing next just because we're married and want to file jointly?

    Posted by: riverdal | Apr 13, 2011 12:14:16 PM


  2. @riverdal: oops, sorry. fixed.

    Posted by: Ari Ezra Waldman | Apr 13, 2011 12:16:30 PM


  3. "Various state and federal laws tend to create extra costs for single ... gays and lesbians"

    I missed the part in your article about the gay tax applying to actual singles.

    Posted by: DaVinciSmetana | Apr 13, 2011 12:26:19 PM


  4. Thanks for addressing this. My partner and I have been together for 13 years. We file separately but have questions every year about who should claim what.

    Posted by: kirkyo | Apr 13, 2011 12:28:54 PM


  5. Some friends in California filed jointly for 2009 and it was accepted by the IRS. I am inclined to think it was an oversight from the IRS and not an actual change in policy. It also could be that neither made enough money to merit the fight. However, it shows that the IRS does not need to change any policy or procedure in order to do it.

    Posted by: Chadd | Apr 13, 2011 12:53:17 PM


  6. For more discriminatory-in-effect treatment (but this time in a good way for some LGBT couples), same-sex couples in California, Washington, Nevada and presumably other community property states should note that the IRS has recently determined to apply income-splitting as is done for married couples:
    http://www.lambdalegal.org/publications/factsheets/fs_the-irs-applies-income-splitting-community-property.html

    Posted by: Tyler | Apr 13, 2011 12:53:34 PM


  7. If the IRS forces gay couples to lie about their marital status on their taxes then isn't the IRS guilty of subornation of perjury? Would that not make the statute that required legally married gay couples to file as single illegal on it's face? Any lawyers out there with a legal opinion on this?

    Posted by: George McGinnis | Apr 13, 2011 1:08:00 PM


  8. I wonder if the IRS's system can recognize two individuals filing a joint return as same-sex? I believe the joint form just uses the terms "you" and "spouse." I would love to see the Republicans push through a bill to spend millions updating the IRS's computer systems and forms to be gender based.

    Posted by: M | Apr 13, 2011 1:13:36 PM


  9. @George

    I don't believe so because in the eyes of the federal government they're not married and since the IRS is a federal agency, same-sex couples are in states (married at the state level and single at the federal level). While this is a conflict caused by DOMA, it's not illegal on the part of the IRS. Also in theory, same-sex couples are not lying because they're married at the state level and not the federal level.

    This just goes to show that we need DOMA to go away ASAP.

    Posted by: deppy | Apr 13, 2011 1:27:38 PM


  10. @Garry: Thank you for your question. This is a quirk caused by DOMA, but there is no subornation of perjury here. When it comes to the federal government, gays cannot be married, so you would be telling the truth (per federal law) when you say youre single.

    Posted by: Ari Ezra Waldman | Apr 13, 2011 1:40:59 PM


  11. While I tend to agree with the motivation behind the campaign, the ultimate question is whether it will be an effective means of producing change. Because what's the point in spending all this money in fines and possibly going to jail if the nothing is changed? Unlike the sit-ins during the 1960's Civil Rights movement, a "tax-in" doesn't seem like it will garner that much publicity--namely because the violators will not be attacked by dogs or brushed aside with fire hoses. They will simply be assessed a fine, and possibly some jail time, but not with the same news-worthy dramatics endured by black citizens 70 years ago. One of the main reasons the Civil Rights movement worked is because, for once, the atrocities of the South were made extremely public and people, like President Kennedy, for example, were "sickened" by the horrible display across the papers.

    It doesn't seem that a couple filing jointly, and getting fined/jailed is really that sensational as to attract support from those in power. In fact, even some marches that MLK Jr. held were considered "failures" by himself and his organizers because the protestors were simply carted away and jailed--there was no violence for reporters to make a story out of.

    I'm not saying that I think we should rally violence against our community, but maybe the cost-benefit of defying Uncle Sam doesn't pay off to those who will ultimately bear the burden.

    Posted by: Will | Apr 13, 2011 1:55:01 PM


  12. A few points:

    -Please don't file two original returns, i.e. individual and joint; your entire processing with grind to a halt and you will not get any refund until it gets straightened out months later. The better option is to file 2 original returns and then a joint amended return and see what happens.

    -There is a chance a joint filed return would get processed, there is no gender check when processing fed tax returns. This is a risk tho if the return is ever selected for audit, for any reason.

    -You would not go to jail for a violation of this kind. Interest on unpaid tax, yes (currently 4% APR); failure to pay penalty, likely, since I don't think the IRS definition of reasonable cause would apply here, but you are always allowed to make your case and appeal it all the way to tax court if you like.

    Posted by: PDX Guy | Apr 13, 2011 5:07:19 PM


  13. It would be a lot smarter to dedicate the time and, probably, money you will spend in this "protest" to a cause which will actually benefit the gay community.

    Dealing with the IRS, even when you're entirely right about something, is no fun. Doing so when you're in a gray area is just asking for endless letters, phone calls, and confusion.

    Posted by: BobN | Apr 13, 2011 7:27:47 PM


  14. I agree with BobN. This is a symbolic act and a waste of time. Donate the money to a gay cause, or a not so gay charity, or whatever. There are ten thousand ways to do good in the world, and yet the selfish crowd never tire of inventing non actions to feed their egos.
    On another note, the tax I've always noticed is the tax for the schools. We all have pay it, either in property taxes or in high rent payments. It's probably massive and hits single and married queens alike. Why is that not an issue? And when did the married crowd become deserving of all the attention?

    Posted by: Wilberforce | Apr 13, 2011 10:51:05 PM


  15. been together 13 years and married for 3. we are filing joint for both state and Federal and the gov't can basically suck it. We are putting away the potential tax if we filed separate and have the money grow in our account just in case.

    Posted by: KevinD | Apr 14, 2011 6:37:03 AM


  16. I guess I'm missing something here. If couples file jointly they may end up paying more taxes. Barring all the hassles from the IRS, why would anyone want to pay MORE taxes? It's not like the IRS is going to come out and say "OK, we give! We'll recognize gay marriage, already!".

    This seems like a really lackluster way to protest that is non-public and non-newsworthy. My partner and I have filed separately for 16 years, zero dependents and both get a hefty refund every year with tons of write-offs.

    Until Indiana recognizes civil unions or gay marriage, (and that's basically when hell will freeze over and monkeys will fly out of Chaney's a$$) it would be pointless for us to file any other way, probably cause a delay in our refund and red flag us for an audit from then on. Once the IRS has you on their little red list, you are watched for life. I have friends who have gone through this, it's not a picnic.

    Posted by: johnny | Apr 14, 2011 7:25:22 AM


  17. Regarding Wilberforce's comment, which I take to mean he thinks it unfair for gay people, presumably childless, to have to pay school taxes, he ignores two important points: 1) not all GLBT people are childless and not all straight people have children, and 2) the importance to society, regardless of whether or not one is a parent, that we guarantee the all-around education of each generation of children in order to maintain a strong, viable workforce and productive nation, not to mention a citizenry that understands the workings of representative democracy in order to ensure its future success. Sadly, as for the latter, too many Americans, irrespective of their sexual orientation, seem unwilling to support public education adequately, thereby risking the diminishment of the United States as a world leader both politically and economically.

    If, as we often hear, it is a privilege to live in the United States, to be Americans, why are so many of us unwilling to pay for it?

    Posted by: RJS West Hollywood | Apr 15, 2011 12:21:51 AM


  18. so for hundreds or thousands of years it was thought to be a good idea to subsidize families bearing children ( to keep them together). Although imperfectly applied ( 80 yr old coupes marrying) society thought it beneficial to encourage ( by tax beaks) child rearing families. Now it is diluted by goingthe same tax break to(Likely) non children bearing couples....the real reason behind this movement....money....civil unions accomplish all the emotional issues ( visitation, inheritance, common property rights) but only marriage gives the tax teaks.... Can the Gay community be that greedy that they would dilute the "child subsidy " tax laws for families? It is all about the money...children and society be damned!

    Posted by: aga | Jun 28, 2011 1:59:15 AM


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