VT Tax Dept. Reinterprets Civil Union Tax Procedure

by Euan Bear

     If you are a partner in a civil union, filing as “civil union separate” and you figured your taxes using the federal tax rate for singles as outlined in our story last month, the Vermont Tax Department has news for you: you must file an amended tax return by April 15.
      Independent Tax Service Inc. co-owner Martha Abbott said that she called Tax Department Policy Analyst Robert Gross on another matter and reviewed the procedure as outlined in a Vermont Tax Department seminar on how to prepare taxes for partners in a civil union. She was informed that the procedure as outlined was wrong and would give gay couples an “unfair advantage.”
      Taxpayer Advocate Gloria Hobson, a 23-year tax department veteran, co-presented the seminar at which the Tax Department’s interpretation was conveyed to tax preparers. Asked about the prior interpretation and whether there had been a change in policy, she said, “It hasn’t changed. If that’s the way it came out it was inarticulate on my part. For tax purposes, partners in a civil union must file as if married, whether filing jointly or separately, and therefore must recompute their federal return as if married.”
      The correct procedure is to calculate your federal income taxes twice: once as a single person or head of household, since the IRS does not validate civil unions as equivalent to marriages for tax purposes; and a second time, essentially as a worksheet for your Vermont return, as if married filing jointly or married filing separately. Your Vermont tax liability will be based on your federal income tax liability.
      “Civil union filing jointly is probably the better deal for most people,” said Abbott, the exact opposite of the conclusion she had reached based on the Tax Department seminar. “There are lots of ways that you can amend your tax return where the deadline is later, but for this, you have to file an amended return by April 15.”