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Dear Representative Sanpei,
Two weeks ago, the IRS announced that any same-sex couple who married in a state that recognizes same-sex marriage can file a joint federal tax return, even if the state where they currently live does not recognize same-sex marriage.
In a report issued that day, we explained the implications of this decision, particularly for taxpayers in 24 states that do not recognize same-sex marriage but do require taxpayers to reference their federal return in filling out their state income tax (the red AND striped states in the map at the bottom). That's Arizona, Colorado, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, Utah, Virginia, West Virginia, and Wisconsin.
Without further guidance, same-sex couple taxpayers in those states will fill out a joint federal tax return but two single state tax returns, and be stuck because the state single returns require information from a corresponding federal single return. We offered a number of options for states to resolve this, and urged states to resist any calls to decouple their tax system from the federal system, which would impose huge costs on all taxpayers.
Wisconsin is the first to rise to the challenge, with a good solution. On Friday, they issued a revenue guidance for individuals in a same-sex marriage (that is, a same-sex marriage obtained in another state, since Wisconsin does not recognize same-sex marriage). These taxpayers must:
- File separate single Wisconsin tax returns, or if qualified, head of household returns
- If filing a joint federal tax form, fill out new Wisconsin Schedule S, which will be made available later this month. Schedule S takes income on the federal joint tax return and divides it up among the taxpayers for use on the state single tax returns. The allocation must be based on actual earnings by the two individuals. Schedule S must be attached to the state tax return.
- Tax returns must be filed on paper, not e-filed.
- No amended returns for past years will be permitted to change the filing status.
This revenue ruling can easily serve as a template for other states facing this issue, as it preserves the state’s desired public policy on marriage while giving a reasonable solution for taxpayers.
It’s possible that some of these 24 states will recognize same-sex marriage between now and next spring’s tax filing season. But those states that do not should consider following Wisconsin’s lead here.
Vice President, Legal & State Projects
One of America’s most established and relied-upon think tanks, the Tax Foundation has since 1937 worked for simple, sensible tax policy at the federal, state, and local levels.