Civil Unions became effective on June 1, 2011 in Illinois through the Illinois Religious Freedom Protection and Civil Union Act. Under this law, partners in a civil union must file a joint Illinois Income Tax returns as married couples beginning in January. Although, the Illinois Department of Revenue did not make it clear if they were going to accept joint returns when the law went into effect, it has now mandated them. Because partners in a same-sex civil union cannot file joint federal returns, they will have to take special steps this year to file their Illinois returns.
If you are an opposite-sex civil union and you and your partner are treated as spouses for federal income tax purposes, you have the option to file an Illinois state income tax return as married filing jointly or married filing separately just like any other married couple. This favorable filing status for federal purposes does not apply for same-sex civil unions. Because same-sex civil unions are not recognized under federal law, partners to a same-sex civil union are not permitted to file joint federal income tax returns or to claim tax breaks or protections that the federal government affords to married spouses.
For state purposes, Illinois allows same-sex civil unions to file a state income tax return either as married filing jointly or married filing separately, but the Illinois Department of Revenue does not make it easy for these couples to be compliant. In order to file either married filing jointly or married filing separately you must complete a “mock” federal return with the same filing status you picked for the state return. For example, if you and your same-sex partner choose to file a joint Illinois return, you must complete a federal “as-if-married-filing-jointly” return, for Illinois purposes only. Also, if you and your same-sex partner choose to file separate Illinois returns, you must complete federal “as-if-married filing separately” returns, for Illinois purposes only. It is very important that you do not send the “mock” federal return you prepared to the IRS. The “mock” returns will be used for Illinois purposes only. When completing your “mock” federal return please include all schedules and attachments, applying all the federal rules for the married filing status you choose. In addition, on the Illinois income tax return you must enter “as-if-married” federal information where Illinois requires federal information. The worst part of this process is that same-sex civil unions will not be allowed to properly file using electronic methods (E-File). Same-sex civil unions must file a paper return.
Special situations you may encounter while completing your federal “as-if-married” return for IL state income tax purposes only.
Earned Income Credit – You must compute your federal earned income credit using the income of both partners in order to properly calculate the correct amount for the state.
“As-if-Married-Filing-Separately” – If you choose this filing method for your “mock” federal return remember that you cannot claim an earned income credit or receive a federal deduction for student loan interest and higher education tuition.
Capital Losses – If you have a net capital loss this year or a net capital loss carryover to this year and offset it against your partner’s capital gain on a recomputed joint return, you may not carry your capital loss over to any other year, even if you file separately in that year or file a joint return with a different spouse.
Net-Operating Losses – If you have a federal net operating loss this year or a federal net operating loss carryback or carryover to this year and you use that loss to offset income of your partner on a recomputed joint return, you may not carry that loss to any other year, even if you file separately in that year or file a joint return with a different spouse.
Please refer to the Illinois Department of Revenue website for additional information on same-sex civil union tax filing procedures or call Provident Light Advisors at 866-256-9621 to schedule an appointment to discuss your return. Provident Light Advisors LLC provides accounting, tax, and consulting services. We are simple, honest, and affordable. Since we are a family owned business we treat our customers as members of our own family. No matter what the time of the day we are here to answer your accounting and tax questions. Provident Light Advisors is also a proud member of the Chicago Area Gay & Lesbian Chamber of Commerce.
Linu Thomas, Partner
Provident Light Advisors LLC
22 W. Washington Street Suite 1500
Chicago, IL 60602
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