Registered Domestic Partners (RDPs) are required to use the same filing status as married couples (for tax years beginning on or after January 1, 2007)
Combining Income in a Community Property State
The IRS ruled that California registered domestic parnters must equally split their community income when filing their indiviual federal income tax returns. This was made public by the IRS on May 28, 2010. Partners can amend past tax returns to switch to this method of reporting. For 2010 and later years the new method is a requirement and not an option.
According to the IRS, registered domestic partners in community property states must continue filing separate tax returns as single taxpayers on their Federal retunrs. However, each partner must report half of the combined community income of the partners.
This clarifies one of the lingering questions relating to federal filing status for registered domestic partners or same-sex spouses married under state laws. They cannot file federal tax returns using status as married filing jointly. Until tax laws are changed, these couples are not defined as spouses for federal income tax purposes.
Please call Valoree to schedule a time to come in and talk about your specific situation. She is here to help you with your tax preparation needs.
The following information is quite informative and is taken directly from the California FTB website:
What if I'm a domestic partner?
Domestic Partners
California Family Code section 297 provides that "domestic partners are two adults who have chosen to share one another's lives in an intimate and committed relationship of mutual caring."
A domestic partnership is established in California when both persons file a Declaration of Domestic Partnership with the Secretary of State, and at the time of filing, all of the following requirements are met:
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Both persons have a common residence.
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Neither person is married to someone else or is a member of another domestic partnership with someone else that has not been terminated, dissolved, or adjudged a nullity.
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The two persons are not related by blood in a way that would prevent them from being married to each other in this State.
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Both persons are at least 18 years of age.
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Either of the following:
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Both persons are members of the same sex.
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One or both of the persons is/are over the age of 62 and meet the eligibility criteria under Title II of the Social Security Act as defined in 42 U.S.C. Section 402(a) for old-age insurance benefits or Title XVI of the Social Security Act as defined in 42 U.S.C. Section 1381 for aged individuals.
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Both persons are capable of consenting to the domestic partnership.
The definition of "common residence" means that both domestic partners share the same residence. It is not necessary that the legal right to possess the common residence be in both of their names. Two people have a common residence even if one or both have additional residences. Domestic partners do not cease to have a common residence if one leaves the common residence but intends to return.
How do I become a registered domestic partner (RDP) in California?
Information on how to file a Declaration of Domestic Partnership can be obtained at the Secretary Of State's Website www.sos.ca.gov.
California Taxation of Domestic Partners - General Principles.
In general, California now affords the same rights and responsibilities to RDPs that previously were available only to married individuals. For California tax purposes, the same rules applicable to married individuals (relating to filing status, community property income, etc.) now apply to RDPs. However, because the federal government does not recognize domestic partners as married individuals for federal tax (IRS) purposes, RDPs will continue to file as unmarried individuals on their federal returns.
Can I file a joint California return with my domestic partner for tax years prior to 2007?
No. Domestic partners cannot file a married filing joint or married filing separate return for tax years prior to 2007. A domestic partner is required to use the same filing status for state income tax purposes that was used or would have been used for federal income tax purposes. For tax years beginning on or after January 1, 2007, domestic partners are required to use the same filing status as married couples.
Is the earned income of domestic partners treated as community property for tax years prior to 2007?
No. Earned income is not treated as community property for state income tax purposes for tax years prior to 2007.
Are all domestic partners required to file joint or married filing separate returns under the new law?
No, only domestic partners who are registered with the California Secretary of State are required to file using the married filing joint or married filing separate filing status. More information on unions entered into from other states will be provided on this Website in the near future.
When will registered domestic partners (RDPs) use the same filing status rules as married individuals when filing California returns?
The new law applies for RDPs filing their 2007 tax returns in 2008.
Can RDPs file a California tax return with the same filing status as they use on their federal return?
No, the new law requires RDPs to file a joint return using the married filing joint or married filing separate filing status. Federal law does not allow RDPs to file a joint return.
If an RDP decides to file a California married filing separate return, are there any special rules for completing the return?
Yes, as is the case with all taxpayers eligible to use the married filing joint status, RDPs that choose to file a return using the married filing separate filing status should see FTB Publication 1051A, Guidelines for Married Filing Separate Returns.
Do RDPs combine the number of exemptions they claim on their separate federal returns to arrive at the total number of exemptions they claim on their California return?
Yes, all personal, blind, senior, and dependent exemptions should be combined on the married filing joint California return. For a detailed explanation of exemptions see Form 540A instructions.
Can an RDP who lives with their partner and files head of household (HOH) for federal purposes use the HOH filing status for state purposes as well?
If your RDP lived with you and your child, stepchild, adopted child, or eligible foster child, at any time during the last 6 months of the year, you do not qualify to use the HOH filing status for California purposes.
Can an RDP file as head of household (HOH) on a California return?
Yes, RDPs can file HOH on a California return if they maintain the main home for their child, stepchild, adopted child, or eligible foster child and are “considered not in a registered domestic partnership.”"
To be “considered not in a registered domestic partnership” you must meet all of the following requirements:
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Your RDP did not live in your home during the last six months of the tax year.
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You file a separate return.
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You pay more than half the cost of keeping up your home for the tax year.
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Your home was the main home of your child, stepchild, or eligible foster child for more than half the year.
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You must be able to claim an exemption for the child.
For details on filing HOH see FTB Publication 1540, California Head of Household Filing Status.
Does an RDP need to terminate the domestic partnership to qualify for HOH?
No, since a married individual can qualify for HOH without terminating the marriage (divorce) an RDP can qualify for HOH without terminating the domestic partnership. In both situations the parties would have to be “considered not in a registered domestic partnership.”
If one RDP dies, can the surviving RDP file a joint return?
Yes, if an RDP dies, the surviving RDP can file as married filing joint for the year the RDP dies if he or she does not enter into a new registered domestic partnership or marriage. If an RDP dies in the following year prior to filing their return the surviving RDP can file a married filing joint return. For more information on surviving RDPs see deceased taxpayer.
How do RDPs who file a California joint return combine their incomes, deductions, credits, etc., from their separate federal returns to complete their California return?
RDPs will combine income and deductions from their separate federal returns to complete their California tax return and compute their tax. Draft instructions for RDPs will be available on our Website in June 2007.
How do RDPs who file a California joint return treat itemized deductions that are subject to AGI limitations?
Under current law RDPs combine their federal AGIs to determine limitations of credits and deductions that apply to their California return. FTB is exploring alternatives to the current law for AGI. For details of the alternatives being considered, see FTB's AGI Limitation Discussion paper.
Can FTB waive accuracy-related penalties for RDPs due to reasonable cause?
Yes, but there are no special rules to grant waiver of penalties for RDPs. "Reasonable cause" is a standard exception to most penalties imposed under the Revenue and Taxation Code and the Internal Revenue Code. Generally, reasonable cause exists where the failure to comply occurs despite the exercise of ordinary business care and prudence.
