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Gay Lesbian Accountant CPA Taxes


This article has been published with the permission of the author 
Martin & Wall, Certified Public Accountants.  
Martin & Wall, CPA is a gay owned accounting firm with offices in
Washington DC, and Chicago, Illinois serving the GLBT community. 
Andrew B. Martin, MS, CFE, CPA and Dana P. Barooshian, MBA, CFE
are both managing partners of Martin & Wall, CPA and can be located online 
at http://www.martinwallcpa.com 

Tax Planning for Gay, Lesbian, and Unmarried Couples

It is critically important that gay, lesbian, and unmarried heterosexual couples choose a Certified Public Accountant who is sensitive to the needs of our community and experienced dealing with our complex tax and financial issues. Our tax and financial issues are not the same as those of married heterosexual families. Although many of us have been in committed relationships for years, the Internal Revenue Service (IRS) defines gay and lesbian couples as "single" for tax purposes. The implications of this definition involve complications that require the advice of a competent professional.

As gay & lesbian marriages have become a reality in Massachusetts, we have been contacted by mainstream accounting and tax publications for our opinions on the differences between tax and financial planning for married vs. unmarried couples.

Martin & Wall, P.C. is proud to have been recently featured in the July 2004 issue of the Practical Accountant, a mainstream accounting industry publication. The article, entitled Sensitivity & Understanding, contains a detailed interview with us concerning the unique circumstances faced for unmarried gay & lesbian and unmarried heterosexual couples when navigating through complex tax and financial minefields.  We encourage all visitors to our website to download the article and send us your comments.  Our firm was also interviewed on this subject in the March 29, 2004 issues of Tax Notes.

Fortunately, there are CPAs, attorneys and financial planners in our community  who do understand how to structure our financial life. The financial and legal systems were not designed with us in mind. For example, two "single" people who purchase a house together need to be aware of how to title the house correctly. A wrong decision can lead to devastating tax consequences. Even when property is titled correctly to maximize tax savings during your lifetime, there is a risk that the IRS will levy serious estate taxes upon the death of one of the partners.  Assets jointly owned by unmarried couples are counted at 100 percent value instead of 50 percent value for estate valuation purposes, which means gay & lesbian couples and unmarried heterosexual couples pay double the estate taxes of married couples.

There are methods to counteract this, such as a life partner directly purchasing a life insurance policy on their partner, but there are pros and cons to ever potential solution to every potential tax problem.  The end result is that gay, lesbian and unmarried couples are forced to pay an extra expense during their life to counteract income tax and estate tax codes that do not account for all types of family structures in our country.

These problems, as well as many others, do not exist for the heterosexual couple. Consultation with an appropriate gay or lesbian professional is essential to navigate around these tax and legal "minefields."

There are some financial and legal advantages to our relationships. For example, if two partners are self employed, they can hire one another to perform bona fide work. The couple gains the ability to legally "income shift" (thereby utilizing the lower earning partner's decreased tax rates). Another advantage is that health insurance premiums become fully deductible by providing health insurance for the "employee." The tax savings can reach into the thousands. An additional advantage for couples is the ability to fund a pension plan for their "employee." These examples are a beginning in understanding the complexities of the tax planning and legal issues surrounding our lifestyle.   In essence, we "marry" couples financially at the conference table -- through contracts, property ownership, contracts, business formation, and many other means -- instead of legally marrying at the alter.  Please seek appropriate professional advice before attempting to implement any of these strategies.

In our opinion, heterosexual professionals, with rare exception, lack the sensitivity to our lifestyle and practical experience with our issues to do effective tax and legal planning. They are not trained how to do it. There is, however, a rising trend towards gay and lesbian professionals "coming out" and making tax planning and legal structuring more equitable for our community.

At Martin & Wall, we provide cogent advice and counsel on how the law can be used to our advantage and how emerging tax policy initiatives may effect our community. If you read our assessment of the Bush Tax proposal, 2002 tax law changes, and 1997 tax law changes, you will get a good feel for our strategic thinking on these important issues.  Also, please see our Wealth Management webpage.

 

This article has been published with the permission of the author 
Martin & Wall, Certified Public Accountants.  
Martin & Wall, CPA is a gay owned accounting firm serving the GLBT community. 
Andrew B. Martin, MS, CFE, CPA and Dana P. Barooshian, MBA, CFE
are both managing partners of Martin & Wall, CPA and can be located online
at http://www.martinwallcpa.com