2014

CNBC Host Suze Orman and Ernst & Young LLP Leaders Discuss Tax-Filing Challenges for Married Same-Sex Couples

Leading voices in financial planning and diversity and inclusion share tips to navigate these economic inequalities

WASHINGTON, April 15, 2013 /PRNewswire-USNewswire/ -- While many Americans dread April 15th, tax season comes with additional challenges and hurdles for married same-sex couples. CNBC Host Suze Orman and two Ernst & Young LLP leaders participated in a press conference call Monday to discuss the challenges same-sex married couples face during tax season and shared some financial planning tips.

During this call, coordinated by the Respect for Marriage Coalition, Suze Orman discussed the financial challenges individuals face.

"In order to be financially secure now and in the future, same-sex couples have to devote time to financial and estate planning," said financial advisor and CNBC host Suze Orman. "DOMA requires families to look ahead and plan a budget around its restrictions, which includes higher federal taxes and tax penalties on benefits."

The patchwork of laws across states, counties, and cities in the United States pertaining to same-sex marriages — along with DOMA — leaves many couples facing different protocols, paperwork, and additional financial costs. Because of DOMA, married same-sex couples and their families are not federally eligible for — and their spouses are not entitled to — the same economic benefits and protections available to married straight spouses.

Elda Di Re, Partner, Personal Financial Services Area Tax Leader, Ernst & Young LLP, discussed the challenges the company has seen as financial advisors, and also highlighted specific tips for same-sex couples on how to navigate the tax system.

"Many couples find filing taxes complicated as it is, but the differences between federal and state filing for same-sex couples make their situation even more complex," said Di Re. "It's important that couples know how to separate and file state and federal returns, make sure they're reporting their income and deductions properly, and plan ahead for potential action to end DOMA."

DOMA also presents challenges for businesses that offer competitive benefits for all employees. These benefits for married same-sex families are treated as taxable income, which the Center for American Progress estimates costs millions of dollars annually.

Karyn Twaronite, Americas Inclusiveness Officer for the global Ernst & Young organization and Ernst & Young LLP partner, addressed the business case for lesbian, gay, bisexual and transgender (LGBT) inclusiveness and what companies can do to help same-sex couples.

"The war for talent in the professional services sector is incredibly fierce, and attracting and retaining LGBT talent is critical to our success," said Twaronite. "As a starting point, companies can help LGBT couples facing inequalities by recognizing same-sex married couples the same way they recognize opposite-sex married couples in their processes and communications. Organizations can also make a difference through their own policies, such as offering a tax gross up to cover the extra tax same-sex couples pay on health and welfare benefits in the US. Additionally, companies can educate decision-makers about the inequities they witness but can't address, including same-sex couples losing tax savings since they can't put money into their health care reimbursement accounts for their partners."

DOMA hurts same-sex couples and families in many ways at tax time. Due to the complexity of tax law and the additional complications same-sex married couples face, the Respect for Marriage Coalition highly recommends that same-sex married couples hire an accountant or tax attorney to help navigate the tax process.

Regardless of which state a same-sex married couple lives, they must file their federal income tax as "single" for their federal taxes. In addition to not being able to file as "married," same-sex married couples must also pay a tax on any benefit an employer offers to the same-sex spouse of an employee. When a same-sex couple divorces, the alimony one spouse pays to another is not an allowable deduction as it is for a different-sex married couple. And for many families, they must take part in the painful process of dividing up the family and deciding which parent can claim their children on their tax forms.

Mark Maxwell and Tim Young-Maxwell from North Carolina are all too familiar with these challenges. Despite being together for over two decades, the couple — who married in January of this year in D.C. — and their marriage are not recognized on the state or national level. As parents for their four adopted children, they are not both legally recognized as their parents because of DOMA. From the bigger costs, such as federal taxes on health care, and higher legal and accountant fees to higher gym memberships because they are not recognized as a couple or family, the financial hurdles affect their bottom line and their family of six. 

"We pay twice as much for our accounting fees each year for him to navigate his way through filing our taxes," said Young. "Because of DOMA, we have to file our federal taxes as if we were single, which creates additional confusing steps that we wouldn't have to do if we were a heterosexual couple. And, because both our state and the federal government don't recognize our marriage, Mark and I have had to split up the family during tax season, which is heartbreaking."

The financial burden same-sex married couples face can be staggering:

  • Employees who receive health insurance for a same-sex partner through their employers pay an average of $1,069 dollars more in annual federal taxes than their married co-workers.[1]
  • Couples can wind up paying thousands of dollars more in federal income tax and filing-related expenses when they have to file separately.[2]

In a 2010 economic analysis of tax inequality facing gay couples, University of Massachusetts Amherst Professor M.V. Lee Badgett determined that the majority of married same-sex couples in Massachusetts would pay on average $2,325 less in federal taxes if they were permitted to file as a married couple.[3] The remaining same-sex couples in Massachusetts would see no change at all (11 percent), or a small change, averaging in taxes of $502.36 (23 percent). The financial benefits would also extend to the federal government. In fact, the Congressional Budget Office estimated in 2004 that recognition of gay marriage would help the budget's bottom line by $1 billion a year over 10 years.[4]

For more information about DOMA, the economic impact of not recognizing same-sex married couples on the federal level, and the Respect for Marriage Coalition's work to advance the freedom to marry, visit RespectforMarriage.org.

For an audio recording of today's press conference call, please email press@respectformarriage.org.

The Respect for Marriage Coalition is a partnership of more than 100 civil rights, faith, health, labor, business, legal, LGBT, student, and women's organizations working together to end the Defense of Marriage Act (DOMA) and grow support for the freedom to marry.  The Coalition is co-chaired by Freedom to Marry and the Human Rights Campaign.

[1] http://www.americanprogress.org/issues/2007/12/pdf/domestic_partners.pdf

[2] http://www.washingtonpost.com/national/health-science/supreme-court-ruling-on-same-sex-marriage-might-eliminate-health-care-inequities/2013/04/08/4fad5026-9c9d-11e2-a941-a19bce7af755_story.html

[3] http://williamsinstitute.law.ucla.edu/wp-content/uploads/Badgett-EconomicValueSSCouples-Oct-2010.pdf

[4] http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/55xx/doc5559/06-21-samesexmarriage.pdf

SOURCE Respect for Marriage Coalition




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