PHOENIX — Arizona officials have been forced to craft a new tax form, now that federal law recognizes gay couples who got married in states where that’s legal.
The new Schedule S essentially requires the couples who file joint federal tax returns to allocate whose income belongs to whom and divide up their deductions.
Tax attorney Bob Kamman said that should not be much of a problem for many couples who were legally married elsewhere and now reside in Arizona. Each person’s income from wages can easily be computed.
But he said the situation can become complicated with problems as simple as rental income from a house jointly owned in another state.
“We’re dealing with it the best way that we can to try and make it as easy to administer,’’ said Sean Laux, spokesman for the state Department of Revenue. But he said his agency has to carefully balance what the U.S. Supreme Court ruled earlier this year with an Arizona constitutional provision that the state does not recognize same-sex marriages, even those performed legally elsewhere.
The move comes in the wake of the U.S. Supreme Court ruling earlier this year striking down the federal Defense of Marriage Act. In essence, the justices ruled that same-sex couples who are legally wed are entitled to the same tax benefits as anyone else who is married.
That case involved estate taxes. But the ruling also permits gay couples to file joint federal income tax returns.
Laux said the Arizona prohibition against recognizing same-sex nuptials forbids those couples from filing joint state returns. Instead, they each have to file separate state returns, as singles.
However, Arizona is a “piggyback’’ state: Taxpayers compute their state income taxes based on the adjusted gross income on the federal form.
So the Department of Revenue has prepared a Schedule S in which affected couples have to parse out what’s reported on Line 37 of the federal form — that joint adjusted gross income and the starting form for the Arizona returns — and figure out who gets to report what.
Laux said that does not mean just dividing the figure in half.
“Each partner would allocate the income as it applies to them,’’ he said. So each would report what is on his or her W-2 forms.
Jointly held property, such as a bank account where taxable interest is paid, complicates the formula, however, he said.
Bob Lind, a certified public accountant, said if the couple is not considered legally married in Arizona and community property rules do not apply, he believes the interest each has to report has to be linked to what proportion each person contributed to the money in the bank.
And Lind said real property holdings can make things even more complicated — especially if its property a couple bought as community property in a state where they can legally marry but now, having moved to Arizona, are getting rental income from it.
On top of that, said Kamman, are questions of other kinds of out-of-state income. Like when the couple considers Arizona its legal residence but one partner may work, perhaps part-time, in California.
Income earned in that state is considered community property, belonging to both spouses, making half of it attributable to — and taxable by — the other spouse. But the Arizona form would suggest the total must be reported solely by the spouse who earned it.
Laux said the Department of Revenue is not concerned that taxpayers may seek to gain some advantage by allocating income between gay spouses in a way to gain a tax benefit, perhaps to ensure that one person is not bumped into a higher tax bracket.
“It’s like everything else,’’ he said. “It will be monitored by audit.’’