Yesterday, I attended the IRS/Tax Practitioner Symposium sponsored by the IRS and the Illinois CPA Society. As you can imagine, same-sex marriage was mentioned several times as a “hot topic.” While presenters had several different viewpoints on the issue, the Illinois Department of Revenue presentation reminded me just how confusing the patchwork of state and federal laws makes filing federal and state tax returns.
Civil unions create a headache when filing a joint tax return
As I’ve mentioned before, Illinois allows Civil Unions, not marriage, for gay and lesbian couples. If you and your partner enter into a civil union, you must file a married filing jointly or married filing separate state tax return. Before Windsor, this meant the couple would have to file separate federal returns, a joint state return, and a mock joint federal return. If that weren’t enough, with the state return, the couple had to file a Schedule CU which requires you to compile the information from both separate federal returns and your fake “as if married” return. (You can’t beat that phrase on an official document.)
Now, post Windsor, if you marry in a jurisdiction that allows same-sex marriage, you are automatically considered to have entered into a civil union in Illinois, without having to file the required paperwork. As such, you must file a married federal and state return (but don’t need to file the IL Schedule CU). However, if you only enter into a Civil Union in IL – a friend’s sister will do that this weekend – you still have to go through the rigmarole of preparing four different returns, and you don’t get any federal spousal protections.
Have your civil union and marriage too
To me, this headache makes getting a civil union in Illinois pointless. (Sorry, the robot part of me needs to get this out.) I understand that you marry for more than just convenience of filing returns. My friend, who is in the wedding party this weekend, said her sister wanted to have a celebration where her friends and family (mostly from here) could participate. Again, I get that. My suggestion, though, would be to have your party here, and then head over to Iowa to make it official. By doing both, you obtain all of the federal and state protections of a married couple, and to my point, you simplify both the federal and state returns.
I heard a couple of other interesting stats from the IL DOR presentation. According to the most recent census, 32,469 same-sex couples live in Illinois. Out of those couples, 3,700 (about 11%) have registered for Civil Unions. And out of those 3,700 only 40 – 45% of them have filed their required joint state income tax return (1,597 in 2011 and 1,687 in 2012). So in addition to making it difficult for same sex-couples to navigate the marriage-benefits landscape, the state is also missing out on substantial revenue simply for dragging its feet on the marriage issue. Get it together Illinois.