Domestic Partner in Community Property State (CA)

[peggysioux]

Handling tax returns for registered domestic partners in CA, both receiving Social Security income. I have researched to determine if social security income should be considered community income in the year received and I do not find anything definitive; however it appears from things I have found, it appears that social security income is considered community income. However, the last two tax preparers who have handled taxpayers' returns have not applied the social security income as community. Hoping other tax preparers have handled this issue in the past and provide some input.

Thank you.

Peggy Sioux

[Rapid Robert]

Check Pub 555, the answer is there.

[peggysioux]

Pub 555 states the laws of the state in which you are domiciled govern whether you have community income or separate income and pub 555 does not specifically address social security income. For people getting a divorce, CA law states social security income as separate income; however there seems to be a grey area on how to handle social security income when filing tax returns. As I stated in first post, I think it should be considered community income; however past preparers (more than one year and different preparers) handled as separate income. I was hoping to receive some input as to how other tax preparers handle.

[terryats]

From pub 555 page 8, Social security benefits. Treat social security and equivalent railroad retirement benefits as the income of the spouse who receives the benefits

[peggysioux]

From pub 555 page 8, Social security benefits. Treat social security and equivalent railroad retirement benefits as the income of the spouse who receives the benefits

Page 8 of Pub 555 is referring to Community Property Laws Disregarded and states "these rules don't apply to registered domestic partners" to I am still uncertain on the handling of social security income for taxpayers.

[Rapid Robert]

I vaguely remember that the IRS position taken some years ago in a PLR or something was that the word "spouse" had a very limited meaning and would not apply to RDPs, who are essentially equivalent to spouses, but technically are not for federal purposes. So I would take the disclaimer in the pub with a grain of salt, as they definitely don't say anywhere that Soc. Sec. is community income, either.

To answer your question, I have been doing both RDP and MFS returns in most years I've been in practice in CA, and I treat Soc. Sec. benefits as separate income. It's consistent with treating FICA taxes as separate, not community. (If the tax paid for the benefit was separate, then the benefit was separate -- just like in come from separate property is separate).

What are you referring to in your first post about "things I have found"?

As a practical matter, as you can tell from the work of the previous preparers, it's not going to automatically cause problems with the IRS.

[peggysioux]

I vaguely remember that the IRS position taken some years ago in a PLR or something was that the word "spouse" had a very limited meaning and would not apply to RDPs, who are essentially equivalent to spouses, but technically are not for federal purposes. So I would take the disclaimer in the pub with a grain of salt, as they definitely don't say anywhere that Soc. Sec. is community income, either.

To answer your question, I have been doing both RDP and MFS returns in most years I've been in practice in CA, and I treat Soc. Sec. benefits as separate income. It's consistent with treating FICA taxes as separate, not community. (If the tax paid for the benefit was separate, then the benefit was separate -- just like in come from separate property is separate).

What are you referring to in your first post about "things I have found"?

As a practical matter, as you can tell from the work of the previous preparers, it's not going to automatically cause problems with the IRS.

https://law.scu.edu/same-sex-tax/are-current-social-security-receipts-taxed-as-community-income/
Same-sex spouses and partners have no federally created rights in the social security benefits of their spouses or partners. And so there can be no conflict between federal law and state law on this matter. Federal law is silent and state law says the receipt should be split 50/50 because it is owned by the community the moment it comes into existence.

[Rapid Robert]

I looked at the link you provided It's one author's opinion, no citations of state law or court cases are provided, and even the author acknowledges that most everyone else disagrees. As I already stated, I have no problem treating Soc. Sec. as separate income, and the prior two preparers in your case apparently did not either. I don't believe you are going to find substantial authority. And in the end, does it really matter that much? I assume you are trying to lower the combined tax bill by allocating some SS to the low-income partner, but given that SS is never fully taxable anyway, and is limited to a max amount, it doesn't seem like it should be a huge issue on the tax return. And if you do, are you going to go back and amend the prior year returns too?

[peggysioux]

I looked at the link you provided It's one author's opinion, no citations of state law or court cases are provided, and even the author acknowledges that most everyone else disagrees. As I already stated, I have no problem treating Soc. Sec. as separate income, and the prior two preparers in your case apparently did not either. I don't believe you are going to find substantial authority. And in the end, does it really matter that much? I assume you are trying to lower the combined tax bill by allocating some SS to the low-income partner, but given that SS is never fully taxable anyway, and is limited to a max amount, it doesn't seem like it should be a huge issue on the tax return. And if you do, are you going to go back and amend the prior year returns too?

Thanks for the input. I filed as separate income.

Peggy Sioux