Idaho state Tax Commission David Langhorst says the commission wasn’t taking any policy stand when it adopted new rules this week that will have the effect of forcing Idaho same-sex couples legally married elsewhere to recalculate their federal income taxes from joint returns, in order to file separately in Idaho. That’s because Idaho’s state income tax returns, like those in many states, are based on the taxpayer’s federal returns. Idaho’s previous rules required taxpayers to use the same filing status on their Idaho returns that they used on their federal returns. But now that the IRS has ruled that same-sex couples who were legally married in states that permit such marriages can file jointly, there was a conflict between that rule and Idaho’s constitutional provision banning state recognition of same-sex marriage.
According to the Tax Foundation, 24 states both ban same-sex marriage and have state income tax systems that are tied to the taxpayer’s federal returns. “Every one of them is struggling with this,” Langhorst said. “The CPAs were really the ones calling us and saying, ‘You guys have to do something about this.’”
Gale Garriott, executive director of the Federation of Tax Administrators, said, “For those that recognize same-sex marriage, I don’t think it’s going to be much of an issue at all. For those that don’t, and have to tell each of the taxpayers how to identify their share of the joint income and how that affects their forms, that could be a little bit of a challenge.”
However, that same challenge previously was in place for states that recognized same-sex marriage when the IRS didn’t, like Massachusetts and Connecticut. In those states, if their state income tax was tied to the federal system, same-sex couples had to re-calculate between their state and federal returns in order to file jointly with the state, but separately with the IRS.
It’s not an issue in Washington state for two reasons: Washington recognizes same-sex marriage, and it doesn’t have a state income tax.
The Idaho Tax Commission’s new rules say the only taxpayers who can file joint state income tax returns are those whose marriages are recognized under Idaho law. New tax form instructions for 2013 direct those who file federal joint returns as a same-sex couple to file their state returns as single or head of household. They can either re-do their federal tax forms to figure out the differences, or submit the calculations on a worksheet.
“It is a lot of work,” Langhorst said. But, he said, “It is the only way that we could avoid the real headache of rejecting their returns. That would be the alternative. Then they would not have legally filed.”
Garriott praised Idaho officials for establishing their new rules early. “If people are given good instructions and plenty of notice, and even some examples, then it shouldn’t be that big of a problem,” he said.