MORE TAX INFO

by Josef Molnar

DOMESTIC PARTNER HELP

Some gay people are fortunate to work for companies that offer domestic partner benefits for their loved ones, but it’s a privilege many don’t realize they pay a premium to enjoy.

“Domestic partner benefits are an example of how married couples are different from the way domestic partnerships are treated,” tax preparation expert Kathy Hubbard says.

As with standard health benefits, the employer pays for all or a portion of the insurance for the domestic partner, but the IRS treats this situation as a fringe benefit, the way it would with a gym membership. This creates a taxable situation in which the employee ends up paying for the portion of the insurance premium that applies to her or his domestic partner.

While domestic partner benefits are less expensive than buying health insurance for the partner outright, the more the employee makes, the more he or she is likely to pay for the privilege to cover that loved one.

FAMILY VALUE

Although gay couples benefit by being able to file their taxes separately and thereby avoid the so-called “marriage tax penalty,” recent changes in the tax code make it nearly impossible for the breadwinners in some gay couples to claim those exemptions.

Some gay couples have one stay-at-home parent and another who supports the family. For the working parent whose children are biologically related, claiming these children has never been an issue.

However, the IRS definition of a foster child has changed. In previous years, the tax laws essentially stated that any child the person raised as her or his own child could be claimed in end-of-year tax returns. That law now states that any child not biologically related to the parent and who is placed in the person’s custody by a children’s agency can be claimed as child deduction.

This change not only restricts the deduction to a much lower “dependent stranger” deduction, but it also eliminates the “head of household” option that was previously available. Depending on the breadwinner’s income, this significant change can greatly increase the breadwinner’s taxable income by several thousand dollars.

Breadwinners who want to claim the non-biological foster parent status of his/her partner’s children are now being forced to consider filing a case with the courts to have the other birth parent declared unfit and transfer custody of the child or children. Such a move is repugnant to most people, and in many cases would probably create more problems than it would solve if the other biological parent were to fight for custody.

PENALTY BOX

The IRS has different penalties it applies to taxpayers, and knowing just how much you will pay may require a little research or help from a tax professional.

Interest: All payments will incur an interest penalty, which is the amount of money the IRS would expect to make off of your payment. It uses the current rate that is posted online, and may change monthly.

Late Payment: This penalty is charged to people who don’t make their tax payment before or on April 15. This fee is automatic, even for people who file extensions. To compute the late payment penalty, take 50 percent of the interest rate and multiply it by the amount you owe. The amount is not prorated.

Late Filing: This one can be expensive. If you haven’t filed an extension, the IRS tacks 5 percent onto the amount you owe each month for five months. This penalty stops at 25 percent after 5 months, but the amount you may end up owing will continue to rise based on the late payment interest rate. If you owe $1000 and don’t pay for a year or two, the amount you owe could end up doubling to $2000.

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