~ by william e. kelly
The Defense Of Marriage Act, (DOMA) dictates that same-sex marriages cannot be recognized at any federal level—The Rage Monthly’s October 2011 issue of the “Think About It” article “IRS Creates Clash Between DOMA and State Sovereignty” described the fallout from a subsequent mid-2010 IRS ruling change.
The article can be revisited at either website below:
(I must apologize that this information could not be made available to assist other tax payers in filing their 2011 returns, but it wasn’t until after the April 2012 issue went to press that this case was resolved.)
The IRS now requires legally married same-sex couples and registered domestic partners in states having community property laws to take the sum of their incomes minus the sum of their deductions, divide the result by two and reflect the result on each of their federal returns as single tax payers. Unlike opposite-sex relationships there is no option to file either single or joint federal tax returns to reduce their tax liability. The consequences are devastating for many. Yet for those with considerably higher or lower incomes than their same-sex spouses, the average tax liability decreases significantly providing windfall refunds—some I know reported five-figure returns.
Unlike opposite-sex relationships there is no option to file either single or joint federal tax returns to reduce their tax liability. The consequences are devastating for many.
Through The Rage Monthly’s affiliation with the EDGE Media Network, the story initially went national and created a bit of a stir. The concepts were and remain so outrageously convoluted that accountants, tax attorneys and specialists could not agree on how to interpret the IRS ruling. As a result, many returns were filed incorrectly and may or may not be subject to future audits or penalties plus back taxes, but those are future potential battles yet to be fought.
Many have already suffered various negative consequences, however this follow-up is about the unanticipated negative impact it had on my husband and those with like circumstances. I suggest going to a recent Truth Wins Out posting and read it and reader comments to get some feel for other examples of tax inequalities and burdens:
In the 2011 Rage Monthly article, I shared the financially devastating news that based on the IRS ruling, my income was now over-reported to the Social Security Administration and we subsequently learned my husband’s was therefore being under-reported. Their requirement adding half of my husband’s income to my own, now meant my income level disqualified me from receiving the early retirement benefits I previously qualified for and had received. I was told to repay $10,000 that had been legally received and that I no longer was eligible for early retirement.
Their requirement adding half of my husband’s income to my own, now meant my income level disqualified me from receiving the early retirement benefits I previously qualified for and had received. I was told to repay $10,000 that had been legally received and that I no longer was eligible for early retirement.
To add insult, my husband was also penalized, by reducing the benefit he would be entitled to at retirement—it also required I pay half of his social security tax for his sole proprietorship Schedule C business. The letter informing me of these details arrived via mail—with no signature or proof of delivery required. In a state of shock, I read that I had 30 days to contest the ruling before it would be a done deal, of which I had already lost 10, because I had been away when the letter came.
My husband and I chose to appeal, chronicling the process we experienced. This is a synopsis of that arduous, expensive, time consuming and emotionally draining experience—a nine-month journey to hell and back. It is the stuff from which nightmares, nervous breakdowns and depression erupt—we were two Viet Nam war veteran seniors facing the unthinkable with disbelief. We had always been so conservative in filing our taxes, that friends teased we would likely be audited for overpaying taxes. Yet, here we were, in a dilemma no honest citizen should find himself or herself facing. The incomprehensible complexity of this ruling and subsequent widespread misinterpretations and bureaucratic events that followed is a truly stranger than fiction story.
Yet, here we were, in a dilemma no honest citizen should find himself or herself facing. The incomprehensible complexity of this ruling and subsequent widespread misinterpretations and bureaucratic events that followed is a truly stranger than fiction story.
We contacted our Social Security office and asked for a meeting. They refused, insisting our issue was with the IRS. It took two weeks of persistence and on the last call it felt like they were about to cut us off again, when we pleaded for an audience and they reluctantly agreed to meet. We had managed to stop the 30-day clock just short of our appeal deadline. Support documents and policies in hand, with an accountant and tax attorney on either side, we surprised the waiting agent. As we made our case, her reaction gradually shifted from a defiant bureaucratic, “You must have filed incorrectly.” to “The IRS can’t do this, it’s contrary to Social Security rules—I’m going to send this up the chain for a ruling.” We were told to expect it to take two months.
A letter dated October 11 stated my appeal was under review and for now I would continue to receive my regular monthly benefit check. If the decision went against us, I would have to add this amount to the $10k they already claimed I owed. On November 13, 2011 I received another letter stating that my check was being adjusted to attribute half of my husband’s earnings to me and $160 would be held back to cover some of my overpayment, with no mention of the appeal underway. On December 14, 2011 a letter detailing a Cost of Living Allowance (COLA) increase, but again no mention of the pending appeal. Months passed as the potential repayment continued to grow, with neither resolution nor any indication when it could be expected.
Our fears and nerves were getting the best of us and in desperation I contacted my district city councilman, Todd Gloria, explaining none of my federal elected representatives were responding to letters asking for their help. He advised that I needed to go directly to the local offices of my Representative, Susan Davis. I spoke with Jessica Poole who provided me a “House of Representatives Caseworker Authorization Form” to complete. On 2/17/2012, I received a personal letter from Representative Davis informing me the inquiry was underway.
Our fears and nerves were getting the best of us and in desperation I contacted my district city councilman, Todd Gloria, explaining none of my federal elected representatives were responding to letters asking for their help. He advised that I needed to go directly to the local offices of my Representative, Susan Davis.
Ms. Poole called to confirm that I had received Representative Davis’ letter. On March 1 Representative Davis assured me the regional Social Security office was on the case. I received a call on March 14, from the Chicago Social Security office informing us that we would have to file amended tax returns to get the Social Security decisions overturned.
Frustrated, I explained to the caller that there was no legal path for an amended return because of the conflicting way the IRS required legally married same-sex couples from community property states to file. The caller said there was nothing more that could be done and a letter would be sent to Congresswoman Davis, my attorney and us requiring an amended return. There seemed a total disconnect that there was no legal avenue to do so because of the conflicts between how the IRS and Social Security gathered, shared and interpreted the facts.
I contacted Ms. Poole and explained the call. Minutes later, the Chicago Social Security offices called back to tell me that the file was complicated by conflicts between the IRS’s rule change and the conflict it presented with Social Security’s rules. Hello, didn’t I so inform them? The case file was then bumped up to a higher authority.
Two weeks later a managing agent from the local San Diego Social Security office called to report their decision and resolution of our case, acknowledging that it had taken “considerable effort” to sort out the issues but we were absolved of the charges and the actions taken against us.
Two more weeks passed without any of it in writing, so I phoned the San Diego Social Security agent handling our case. He was very respectful and apologetic about the turmoil we had been put through and indicated he was determined to prevent it from being repeated.
1. Until the IRS amends the mid-2010 ruling, Social Security Administration computers will receive IRS information that will annually cause my file to be flagged and the repayment and disqualification letter to be issued. His solution was to place a note on our file detailing the source of the error with instructions to manually back it out to reflect correctly the independent rules and policies that govern the Social Security Administration.
2. The fees, repayment and other claims against me were manually removed, my benefits restored and I owed nothing.
3. My husband’s file will be amended to reflect the correct earnings used to calculate his benefit at the time of his retirement.
4. We will receive letters specifying that we have been fully credited for our actual individual earnings.
5. Others facing this issue must contact their local Social Security offices and elected officials, accountants and lawyers to document and resolve these issues or suffer the consequences, perhaps without awareness, ability and advocacy on their behalf.
The difficult if not impossible complexity of this situation and subsequent wide-spread misinterpretations and bureaucratic events have given rise to extremely different and inconsistent filings by couples like us who continue to trigger audits and penalties for LGBT couples. More needs to be done by our government, agencies and communities to make people aware.
While I believe such awareness campaigns will eventually end DOMA and the injustices being perpetrated, I also believe more will suffer unnecessarily because not enough is being done to share what is now known with those who do not!