The IRS does not discriminate

IRS Issues an Apology to Same Sex Couples It Yelled at For Doing Their Taxes Wrong

Gay and lesbian couples in California got an “I’m sorry” from the IRS last week after robo-letters went out to same-sex couples who filed under new IRS rules which recognize their relationships for the first time in states with community property rules (California, Nevada and Washington). That means joint property is divided 50/50, regardless of who wears the pants (or the dress) in the couple.

Scott James has the scoop via the Bay Citizen:

The change to the tax code, put into effect for 2010, was supposed to be a step toward equal treatment by the I.R.S.

Instead, couples have faced a litany of conflicts. The latest involves at least 300 taxpayers who have had their returns rejected with terse letters signed by an enigmatic I.R.S. employee named J. Bell from Fresno.

“Your return includes income or tax liability for more than one taxpayer, other than husband and wife,” the letters read. Note: husband and wife. Not two husbands, or two wives.

Couples who received the letters had to produce additional paperwork and faced delays in receiving refunds; most were forced to hire tax professionals.

In a statement this week, the I.R.S. said that the letters had been “incorrectly sent” because of a processing error and that it “apologizes for this mistake and sincerely regrets any inconvenience to taxpayers.”

Santa Clara University law school professor Patricia Cain has an excellent blog on the subject of same sex taxes. Of the IRS apology, she said “Just to be clear, in my view, the battle is not between us and the IRS. The IRS wants to do the right thing. It wants to tax each citizen on the right amount of income under existing law. That is its job. However, the IRS is seriously hampered from promulgating rules that apply to same-sex couples by the the Defense of Marriage Act (DOMA). The IRS is to be commended for understanding that DOMA cannot usurp state property law. Thus I continue to applaud its decision about how to tax community income of same-sex couples. And now that the IRS understands how difficult it is to communicate these new rules, even to its own employees, I applaud them again — this time for their apology — which, by the way, I accept.”

Let me give the IRS a tip: you need money, right? Same sex couples have it. They do all the things other taxpayers do – buy stuff, work, pay their taxes. All they are asking for is equal treatment under tax laws. If straight couples can get trapped in loveless marriages and file jointly, why can’t gays have the same rights?

We all deserve to be miserable, overtaxed and sexless.

The Latest Feel Good Story Involving the IRS

Thumbnail image for IRS_logo-thumb-150x140.jpgWere you concerned that the IRS wasn’t auditing enough poor people? Well here’s a story that will put those fears to rest: The IRS audited a woman in Seattle who made less than $19,000 a year because she was too poor.
Rachel Porcaro was summoned to the IRS after being flagged for an audit. She was told that based on what she was earning, she couldn’t possibly be supporting herself and her two sons:

“They showed us a spreadsheet of incomes in the Seattle area,” says Dante Driver, an accountant at Seattle’s G.A. Michael and Co. “The auditor said, ‘You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle.”
“They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money.”

Initially, the Service told Ms. Porcaro that she owed the Feds $16,000. When Dante Driver sent a letter to the IRS explaining how he thought the code was being wrongly interpreted, the IRS turned around and audited Ms. Porcaro’s parents:

Rob and his wife, Patty, had to send in house blueprints, bank statements, old utility bills. Rachel was asked to prove her children were hers, as well as document the money she’d spent on her children’s clothes, health care and so on.
They racked up $10,000 in accountant bills — $8,000 of which Driver is trying to recover from the IRS.
In the end, the parents were cleared. The IRS also backed off trying to reclaim Rachel’s earned income tax credit.

Ultimately, Ms. Pacaro had to pay over $1,400 in back taxes, penalties, and interest because she couldn’t provide enough receipts to document that she could claim her sons as dependents. Her parents are also not allowed to claim them as dependents, so for tax purposes, the two boys simply don’t exist.
Even if you’re a stickler for tax law, the time and expense of this audit hardly seems worth $1,400. The IRS soldiers likely would claim that they were just following orders but the Service was mum on this story. You can safely bet they won’t be apologizing either. The moral seems to be, regardless of your income, keep those receipts people. Yeesh.
$10 an hour with 2 kids? IRS pounces [Seattle Times/Danny Westneat via The Consumerist]