New Jersey State Bar Association - The voluntary Bar Association of New Jersey, serving members since 1899.

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Taxing Questions for Gay and Lesbian Couples

Debra Guston is the chair of the New Jersey State Bar Association’s Gay Lesbian Bisexual and Transgender Rights Section. Guston, who practices in Glen Rock, spoke recently about the tax issues that face gay and lesbian clients. The topic was center stage at a recent section event that brought together roughly 50 tax, family and estate and planning lawyers.

Q: What is a central challenge presented to gay and lesbian clients when it comes to taxes?

A: A lot of issues are generated because the federal government doesn’t recognize the relationship. If they did recognize civil unions then we would be using the old tried and true solution to these problems. We wanted to give an overview to introduce people to these issues and to give some ideas how to strategize how to deal with them.

Q: How do these issues manifest when couples split up?

A: Civil union termination is a lot different than divorce. In a regular divorce, if somebody is going to be paying alimony they pay less because they can deduct it and it is not taxable to the recipient. Since the federal government doesn’t recognize civil unions, that tax benefit or burden does not exist. That makes planning a little more difficult.

Q: What are some of the income tax issues?

A: A civil union couple here in New Jersey must file taxes as though they are married. But they have to do a federal return differently. The manner in which the tax preparer has to do the returns becomes complicated. The preparer has to do a federal return as if the federal government did recognize their union to figure out what the adjusted gross income is, and then file a return as a single.

Q: Is there any financial fall-out that comes with the need to handle these cases differently?

A: Yes. There are many times when the lack of recognition (of civil unions) creates a real financial burden.

Q: Why is that?

A: Sometimes there is no way to get around the tax issues. And sometimes it’s because gay and lesbian clients have to pay more for their legal and accounting work to deal with these issues. They have to pay for more sophisticated planning than their circumstances would otherwise require because they don’t have all the benefits.

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