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Tax Refund Seizures

October 6, 2011 By

Tax refunds are now becoming a mid-year bonus for many taxpayers. A majority of taxpayers receive a refund check after filing returns. The refund is brought about by overpayment of taxes and claiming of credits that warrant a refund. However, if you are owed taxes and are expecting a tax refund, you need to be aware that there are specific situations that can cause your refund check to be seized. Some of these circumstances are explained below:

  • Student Loan Repayments – Student loans have the lowest interest rates, thus making it one of the best loans to have. On the flip side, these loans are hard to default on as the lenders can seize any funds, including your tax refunds and even your Social Security distributions. Therefore, if you are expecting a tax refund and have defaulted on your student loans, be aware that the check for your refund can be seized to pay of the outstanding balance.

 

  • Bankruptcy – Another reason that your tax refund can be seized is in the case of a bankruptcy. The liquidators can write to the IRS and have the refund check seized to pay off some of the creditors.

 

  • State and Federal Outstanding Taxes – If you owe taxes from the past, the tax refund can be used to settle such back taxes. The Federal tax authority and the State tax authorities are always trading information and you can easily get your IRS refund check seized to pay off past due taxes.

 

  • Child Support- If you owe child support, your refund check can also be seized to pay off the due funds. The law allows a person who is owed child support to write to the IRS and seize funds the refunds check of the person owing the support amount to pay off the overdue fees.

 

Circumstances when your Refunds Cannot be Seized

Not all debts can cause a seizure of your refund check. You should therefore not be worried that your refund check will be seized in many of the other debts that you may owe. Some of these financial situations that cannot warrant a seizure of your refunds include the following:

  • Mortgage, Credit Card, and Other Personal Debts – Personal debts such as mortgage loans, credit card loans, and other loans cannot cause a seizure of your tax refund. Therefore, if you have defaulted on your mortgage or other personal loans, you should not be worried that your tax refund will be seized.

 

  • Collectors – If one of your creditors has forwarded you to collectors to recover funds owed, you can rest assured that these collectors cannot seize your refund check in any way to pay off the due funds.

 

Options for Married Couples

If your refund check is due for seizure due to some of the aforementioned reasons and you are married, your spouse can be at a disadvantage. If a married couple files jointly, then the refund that is due to both spouses can be seized to pay off a debt held by one of the spouses. Therefore, if a couple suspects that a check will be seized, then they can go for the following options:

  • Filing Separately – The couple can file separately so that the spouse who has debts can have his or her check seized without affecting the refunds of the spouse.

 

  • Injured Spouse Relief – The spouse who is not liable for seizure of refunds can apply for Injured Spouse Relief so that the portion of his or her refund can be released as the rest of the refunds can be seized and used against the debts due.

 

 

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Stay out of IRS Trouble by Submitting your Payroll Taxes

September 7, 2011 By

The current economic recession has had a hard toll, especially on small businesses. Their access to financing and their ability to shoulder tough business seasons are much less than that of bigger businesses. For this reason, many small businesses are being tempted and choosing to skip the remittance of payroll taxes and instead using these funds to work at surviving in the struggling economy. However noble the reasons for defaulting on payroll taxes may be, the IRS is indeed, not happy with this trend. They are now aggressively seeking such businesses and implementing tough consequences for these defaulters. According to tax experts, payroll taxes may lack the urgency of remitting as compared to other business creditors as the IRS does not proactively seek to recover the funds. However, delaying or not submitting the payroll taxes has the potential of bringing your business to a halt. From freezing a business’s account receivables to placing a lien on the wages of staff responsible for remitting the payroll taxes, the IRS can literally cause havoc to your business. It is therefore, advisable to remain in the good books of Uncle Sam.

Report by Treasury Inspector General for Tax Administration on Payroll Taxes

The extent of delayed and non remitted payroll taxes by many businesses was highlighted by a report on payroll tax compliance done by the Treasury Inspector General for Tax Administration (TIGTA) in early 2011. According to the report by this IRS watchdog organization, about $54 billion of payroll taxes are not remitted every year. This is a huge contributor to the tax gap. For this reason, the IRS has taken drastic measures to catch up with defaulters of payroll taxes.

New Approach Taken by the IRS

Following the report by TIGTA, the IRS has randomly picked some 6,600 employers and is auditing them for payroll tax compliance. The IRS states that this is a start and probably, it hopes that the audits will send a warning to any businesses that are still not complying with tax requirements. Some tax experts have seen this move by the IRS as being unfair and harsh, as it sidelines some employers to take the blame of many others who are not complying. Unfortunately, a non-compliant employer is already at fault and lacks any defense and therefore, the employers who are picked in the sample have no recourse for being selected.

Implications of Withheld and Unremitting Payroll Taxes

According to the tax code, the IRS has a right to hold the company responsible for non-remitted taxes. It also has a right to hold responsible the various individuals and entities who have control over the business accounts and who are responsible for remitting the taxes. This includes the accountants, book keepers, treasurers, and owners of the business. The IRS can even hold business creditors responsible for payroll taxes if they prevent the remittance of the taxes by taking control of the business accounts to recover their debts.

When the IRS catches up with a business that has not complied with payroll taxes, they will not only seek the payment of the due taxes, but will also levy the late payment charges that go as high as 25% of the payroll taxes due. The employer is also expected to pay any interests that would have accrued because of the delay in remittance. The amounts due can really sky rocket and can easily drive a business into economic hardship or even bankruptcy. It is therefore, best to pay your payroll taxes within the deadline and to seek compliance as soon as possible if you are already a defaulter to minimalize your IRS problems.

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IRS Payment Options if you are Unable to Pay Taxes Due

September 2, 2011 By

If you find yourself in a situation where you are unable to meet your due taxes before the tax deadline, do not despair. There are available options that you can take advantage of to ensure that you do not agitate Uncle Sam. Here is what to do if you find yourself in such a situation:

File a Tax Return

Ensure that you file a tax return, even if you are unable to pay off the due taxes immediately. There are worse consequences if you do not file the return. Not filing amounts to more tax troubles and may even surmount to criminal implications.

Consider Various Options for Paying your Due Taxes

Once you have filed your tax returns, you need to plan on how you will pay the taxes due. Depending on the amount of taxes that are owed, you may consider the following options for delayed payments:

  • Request for Short Delay – If you will have the funds to pay the taxes within 120 days, then you may call the toll-free IRS number and request for a short delay. The IRS customer service representatives handling such issues are permitted to make an interest and penalty free extension of up to 120 days if you provide a good reason for the delay.
  • Installment Agreement – If the amount you owe is below $25,000.00 and you are not able to pay it all in one lump-sum, you can apply for an installment agreement under the Online Payment Agreement service available on the IRS website. You can also call the toll-free IRS number to set up this installment agreement. The installment agreement is automatic for any taxpayer who owes below $25,000.00 and you can determine the installments to pay as long as you will repay within the required period. This installment agreement also has an extra advantage – you will not be requested to provide financial statements or any further paperwork. However, you will need to pay interest on the taxes due and late payment penalties. The interest rate for tax debt to the IRS is currently at 4% and is subject to change every three months. The late fee is currently 0.25% for Installment Agreements and 0.5% for tax debts outside IRS payment agreements.
  • Consider Borrowing – You can also consider taking a loan to clear your due taxes. However, you will need to compare the amount to pay if you took up a loan against making late payments through installments. Depending on your loan terms, you can check if the loan interest will amount to more than what the IRS will charge in interest and lateness fees. If the loan interest rate is less than that of the IRS’s deal, then it would be advisable to take the loan and pay off your taxes. However, if it is cheaper to take the IRS Installment Agreement, you should not be hesitant as there is no recourse to taking the agreement.
  • Prioritize Between State and Federal Taxes – If you owe both Federal taxes and State taxes, you should also do a comparison of the charges to be levied if you are late on either of the taxes. You can then pay off the taxes that bear more charges in interest and late fees and place an installment agreement with the tax authority with lower charges.
  • Seek Professional Help – If you owe over $25,000.00 or are still unsure about how to handle your tax dilemma, you may consider seeking help from a tax professional on what to do regarding which option to select.

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Top 10 IRS Tax Deductions and Tax Credits in 2011

September 1, 2011 By

The 2012 April tax season that accounts for the 2011 tax year may seem far and most taxpayers may not be overly concerned with their taxes at the moment. However, being conscious of tax matters as the year goes by ensures that you not only have a smooth tax time as you draw close to the next tax season, but also capitalize on the available tax opportunities. The major way in which taxpayers get tax savings from their returns is through tax credits and tax deductions. Below are 10 of the most common tax deductions and credits that you may qualify for in the 2011 tax year.

1. Charity Donations

Donations are the easiest and one of the most common tax deductions. The tax code allows for a tax deduction of donations made to any qualifying tax-exempt organization. In 2011, the IRS released a list of the organizations that had lost their tax exempt status due to non compliance with various regulations. A taxpayer therefore, needs to verify that an organization is qualified as tax exempt to be able to qualify for the tax deduction. For donations above $250.00, you will need an acknowledgment from the organization that you have donated to as support documentation for the tax deduction. For non-cash contributions above $500.00, you will need to file Form 8283, “Non-cash Charitable Contributions Form”. Non-cash items that are above a given threshold will also require a valuation from a qualified appraiser.

2. Child Care Tax Credit

The Child Care Credit is given to parents or guardians who spend money to have their children or qualifying dependents taken care of while they are out working. The credit can be claimed for regular child care or even for a summer day-camp. The amount to claim depends on one’s income and the number of children. The allowed credit ranges from 20% to 35% of one’s income. The credit also has an annual cap of $3,000.00 for a single child and $6,000.00 for more than one child.

3. Mortgage Interest

The mortgage interest tax deduction allows homeowners who are paying for a mortgage to claim a deduction on the mortgage interest paid on their primary residence and qualifying second home. Various rules govern the qualification of primary residence and second home and you will need to ensure that your homes qualify before deducting these expenses. Besides mortgage interest, you can also deduct the real estate taxes paid on non-business property.

4. Medical Expenses

Various medical expenses can be tax deductible for taxpayers who choose to itemize their tax deductions. The qualifying deductions are subject to a threshold of the excess of 7.5% of one’s Adjusted Gross Income. The expenses include travel related to medical care, out-of-pocket medical expenses, and health insurance premiums. For out-of-pocket expenses, there are various items that qualify and you can get a comprehensive list of qualifying medical expenses from the IRS website.

5. Health Savings Account

Contributions to a Health Savings Account (HSA) are also tax deductible. However, the HSA must be a qualify one for the tax deduction. Interests earned from the account are also not taxable. However, for a HSA to qualify, it must be a high-deductible health plan.

6. Work Related Expenses

There are various work related expenses that are IRS tax deductible. Various training expenses, business travel (excluding travel from home to the office), qualifying work uniforms and work clothing, and qualifying entertainment expenses for potential clients are tax deductible, subject to various IRS rules. These expenses only qualify for deductions if they were not reimbursed by the employer.

7. Home Offices

For people who work from their homes, they can deduct various home expenses that are related to their home office. You will need to determine and apportion the home expenses that are attributed to the home office to deduct the costs. The expenses include rent, insurance, mortgage, repairs and maintenance, other related utilities, and depreciation.

8. Qualifying Retirement Savings

Contributions to various qualifying retirement accounts such as 401(k) accounts and IRAs are also tax deductible. For the 2011 tax year, the cap on the contributions to these retirement accounts is $16,500.00. For senior citizens above the age of 50, the tax exempt limit goes up to $37,500.00.

9. Education Expenses

The tax code also allows for tax deduction of various education-related expenses. For the 2011 tax year, there is a cap of $4,000.00 for tax deductions of tuition-related expenses. You can also claim the American Opportunity Tax Credit if you qualify for it.

10. Student Loans

Interest paid on student loans is also tax deductible subject to an annual cap of $2,500.00. This applies only to the interest and not the principal. However, to qualify for this tax deduction, you must be earning an income of less than $70,000.00 for single taxpayers or $145,000.00 for married taxpayers who file their taxes jointly.

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Will Free IRS Tax Preparation Software Save the Taxpayer?

August 25, 2011 By

Every now and then, various lawmakers propose a move to have the IRS provide free tax preparation software to the public to save the taxpayers from the money spent on hiring professional tax preparers. The most recent proposal was advocated by Sen. Mark Kirk and Sen. Dick Durbin in mid 2011. The lawmakers argued that taxpayers spend a lot of money hiring tax preparers and this can all be avoided if the IRS were to provide free tax preparation software to them. However, even though such a move would help many taxpayers prepare their tax returns, there are still some arguments against this line of thought. Some of the arguments posed by the opponents of the proposal are:

  • Complex Tax Code – The tax code has been changed so many times since the tax law was enacted in 1913. In fact, the tax code has been significantly altered 28 times since 1913. Besides the significant alterations, every year, Congress passes various modifications and alterations to specific aspects of the tax code. This has made the tax laws very complicated for the average taxpayer. In fact, some of the tax provisions remain unclear even to tax professionals and the IRS staff. In fact, because this is such a significant issue, the Treasury Inspector General for Tax Administration (TIGTA) releases a report every year that reveals large sums of taxpayers’ money lost annually because of a misunderstanding of the tax code. Therefore, the main reason that taxpayers will go to tax preparers to file their returns is because of the complexity of the taxes (as opposed to the convenience of preparing the taxes via proxy).
  • IRS Budget Cuts – Another argument against provisions of the free software by the IRS to taxpayers is the budget cut on the IRS’s resources. The House Appropriations Committee’s subcommittee on financial services reduced the IRS budget for the 2012 fiscal year. The committee approved a budget lower than that of 2011 on the pretext that the Federal government needed to cut on spending, owing to the large Federal deficit. The IRS may even be forced to cut jobs and to place a hold on its various expansion plans. Therefore, introduction of free tax preparation software for taxpayers may be least of their priorities at the moment. The free software will cost funds that the IRS simply cannot afford to exhaust; they will have to spend more funds to train taxpayers on how to use the free software if such a move were to be commissioned.
  • Too Much Information to the IRS – According to various surveys conducted in the past, many taxpayers avoid any direct interactions with the IRS because of their unwillingness to divulge a lot of personal information to them. Tax-preparation software will require the taxpayer to provide a lot of their financial information to assist them in preparing their tax returns. Therefore, many taxpayers would avoid using the free tax software from the IRS in the fear that the IRS would get too much of their personal information.
  • There is Free Tax Preparation Software Already – Another argument against the launch of free tax preparation software by the IRS is the fact that there is already free preparation software available. The Free File Alliance and Vita Software have been providing free filing services for a while. If software were truly the issue, then many taxpayers would not pay for professional preparers and instead, go for these free software (which is not the case). This underscores the fact that tax complexity, and not software convenience, is the main limitation for taxpayers and highlights their preference to seek professional tax assistance.

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IRS Taxes that Affect Land Ownership

August 22, 2011 By

Various land related expenses are treated differently depending on the use of the land and whether the land is improved or unimproved. These expenses include land rates, association fees, and other land maintenance expenses.

Unimproved land

In taxation terms, improved land is land that has a structure on it, such as a building. A piece of land is considered unimproved if it has no buildings on it, even if you bring in utilities such as water, electricity, fencing, and/or a sewage system. As long as there is no structures that can be used for economic purposes or personal housing, it is considered unimproved. For unimproved investment property land, one cannot deduct ongoing expenses. However, you may add the cost of the various one-off capital expenses that you apply to the land to the value of the land and depreciate it if it is an investment property (as opposed to a personal property). If it is personal property, you can add the amount of such expenses used to improve the land to the cost of the land, which will increase your cost price of the property if you were to ever sell it. This way, the capital gain on the property will be lowered and you will consequently pay less in capital gain IRS taxes.

Improved Land

Improved land is land that gives you some utility in one form or another. You may have a personal home on the land or some rental or investment property. If it is an investment property, then the land rates and land expenses are an allowable business expenses and are therefore, deductible for tax purposes every year that the expenses are incurred. Most of the land-servicing-expenses are not deductible for personal-use land.

Investment Property Land

For investment property, any association and property maintenance expenses are tax deductible. The details of qualifications of these deductible expenses are contained in the Internal Revenue Code Section 212. These expenses are a miscellaneous itemized deduction and therefore, follow the rules of itemized deductions. This means that you must add all itemized expenses and subtract 7.5% of your Adjusted Gross Income before deduction. You also cannot deduct this through itemized deductions if you are under the Alternative Minimum Tax (AMT). However, for those under the AMT and for those who do not itemize deductions, you can still add these expenses to the cost of the land so as to reduce on the capital gains (in case you ever sell the land). This option is called, capitalizing carrying charges, and is a choice available for those with an investment property. However, if the investment property is unimproved, you can only capitalize the carrying charges for only one year. If you opt to capitalize the charges, you will need to attach a statement to your tax return form explaining the expenses that you are capitalizing in the year you choose to do so.

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Claiming Qualified Long Term Care Expenses as Medical Tax Relief and Deduction

August 19, 2011 By

Under the Federal tax code, long-term care services provided for medical reasons are an allowable expense to deduct. However, according to Sec. 7702B(c)(1) of the Federal law, a licensed physician must prescribe such care as being fundamental for the well-being of the patient. Long-term care deductions allows for people who have chronic diseases and conditions of incapacitation to receive long-term care, including an attending nurse or caretaker, without paying taxes for such services. There are various rules and qualification guidelines that govern the application of this IRS tax deduction.

Qualification Requirements

The long-term medical care can only be claimed by taxpayers who itemize their tax deductions as opposed to using standard deductions. You therefore, need to use the right Form 1040 to benefit from these long-term care expenses and have them deducted. The expenses also need to have support documentation. The person claiming the deduction must maintain the doctor’s statement that prescribed the long-term care, including the diagnosis of the medical condition. Besides the doctor’s statement, one also needs to keep the receipts or payment vouchers for such medical care. All other tax requirements, including withholding of taxes for any employees involved in the long-term care, need to be adhered to.

Itemized Deduction

Itemizing of tax deductions is more complex than taking the standard deductions route. A taxpayer itemizing deductions needs to schedule all the tax-deductible medical expenses that need to be itemized and determine if the expenses exceed 7.5% of his or her Adjusted Gross Income (AGI). Therefore, for itemized expenses to qualify for deduction, a taxpayer must have above this 7.5% threshold in total medical expenses. There is however, no cap or maximum for these itemized deductions.

Case in Point – IRS vs. Estate of Baral

In some instances, the IRS has differed views with taxpayers on what qualifies as long-term care as prescribed by a physician. This was the case for Lillian Baral, who had been diagnosed with dementia. The doctor recommended long-term care and Baral’s brother, who was her financial trustee, employed two caretakers to attend to her. The condition of her illness deteriorated her mental and physical capacity and she finally succumbed to her infirmity in 2008. Due to her condition, she did not manage to file a return in 2008 for the 2007 tax year. Since no tax return was filed, the IRS decided to use their estimate and determined that she had earned incomes of $94,229.00 and had underpaid taxes by $17,681.00. However, in their calculations, the IRS did not allow for the inclusion of her long-term care expense – Baral’s brother had paid $49,580.00 to the caretakers and had also reimbursed expenses of $5,566.00.

The issue was referred to a tax court to determine if the IRS was just in their actions. In the ruling, the court held that the wage payments to the caretakers qualified as long-term care for tax purposes and that the IRS was out of order to have these expenses excluded for tax deductions. The court however, held that the reimbursed expenses could not pass for the deductible of long-term care expenses as there were no receipts (support documentation) to support these expenses.

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State and Federal Income Tax Requirements for a Business Start-up

August 17, 2011 By

Are you planning to start a business? Well, there are several State and Federal requirements that you will need to meet in order to operate legally. These requirements depend a lot on the type of business entity you settle on for your business. These start-up requirements include both State and Federal tax registration requirements. Below is a list of some tax requirements for various business entities.

Employee Identification Number (EIN)

The Employee Identification Number (EIN) is a tax registration number that identifies employers and tax agents who withhold various taxes on behalf of the IRS. Most businesses require an EIN, especially if they have employees or if they withhold sales taxes. However, sole proprietors that do not employ may operate without an EIN. You can register for an EIN by filling out an online registration form available on the IRS website. You are also required to send an SS-4 to the IRS to accompany the registration form. You will then receive your EIN and you will use it when submitting any withheld taxes to the IRS.

State Business Registration

Various business entities will have different state registration requirements. You can get the details of these requirements by contacting your respective state business registration office or by consulting with a business attorney. In most cases, your business registration will award you a business number that you will be required to provide when filing various State and Federal taxes.

Books of Accounts

The tax authority requires various business entities to maintain various books of accounts as their primary support documentation for their taxes. It is therefore, important to ensure that you set the right books of accounts according to your business entity at the start of your business. This will enable you to be prepared for your State and Federal income tax returns. Generally, sole proprietors will not require detailed accounts but must maintain consistent schedules and records of business transactions. Partnerships, corporations, and limited liability companies will however, require proper double entry books of accounts and clearly indicate partners’ share of profits or dividend distributions to shareholders. The C-Corporation has more complicated books of accounts to keep. You may require the help of an accountant to set up the right account bookkeeping for your business. You can also purchase and install various accounting software that will assist you maintain proper bookkeeping and assist in preparing the taxes for your business.

State Tax Requirements

Various states will have different tax requirements for State taxes. If your business will be a withholding tax agent for sales taxes for example, you will need some tax registration from your State. Various business entities will also have different tax requirements. This is especially so for the business entities created and governed under the State law. These business entities include S-Corporations, C-Corporations and Limited Liability Companies. S-Corporations, for example, require the owner or owners to elect the option in which they will want to file their taxes. They can file their taxes as a sole proprietor, partnership, tax entity, or a Limited Liability Company.

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Happy Ending to an Eliminated IRS Tax Burden for Hero Baseball Fan

August 16, 2011 By

If you are not new to baseball, then the remarkable 3,000th hit by Derek Jeter of the Yankees is no news to you. This remarkable hit by the professional baseball player made him the only Yankee player to ever hit this mark and one in only 28 players to have ever gotten that far with batting. This hit made Jeter join other baseball icons such as Ty Cobb, Hank Aaron, and George Brett, who have made it that far with their hits. However, Jeter was not the only one who went home a winner after that game. The hit ball from this remarkable bat by Jeter was caught by Christian Lopez, a Yankee fan, from the left stand and he too, immediately joined in the fame. After the catch, Lopez was ushered to the Yankee’s President’s Office where he was honored for being lucky on this historic hit. He willfully chose to return the ball to the Yankees to be placed as a monumental gift for their wall (as opposed to selling it off as a memorabilia). For this noble act, the President of the Yankees offered Lopez some autographed memorabilia of baseballs, bats, and some Yankee gear. He was also offered season tickets for executive box seats for the rest of the 2011 home Yankee games.

However, before Lopez could celebrate these awards, the reality of taxes for the gifts was already beckoning. In America, prizes are taxable under income taxes while gifts are taxed on the giver as opposed to the receiver of the gift. Immediately after the events that followed this remarkable hit, the media and various tax blogs across the internet went out speculating on the possible tax liabilities due and whether Lopez was really lucky to have caught the ball. On his end, Lopez said that he was proud to have caught the ball and said that he was unwilling to sell any of his souvenirs to pay off his taxes. He hoped that his parents would meet any taxes that would be due from the catch.

The big question that was at hand was whether the items given to Lopez were actually a prize or a gift. If the items offered by the Yankee President were considered gifts, then the Yankees was bound to pay IRS taxes against such gifts. However, if the items were a prize for both catching the ball and for the noble act of returning the ball to the Yankees, then this can either be considered under income tax as a prize or as a trade and therefore, taxed under sales tax. Either way, tax experts had projected that a tax of an amount between $5,000.00 and $14,000.00 would have to be paid to Uncle Sam one way or another.

However, recent events have concluded this legendary baseball event with a happy ending. Miller High Life, through the Miller Brewing Company, said that they are offering to pay off any tax implications that would arise for Lopez. In a press statement, the brewing company stated that it was not right to punish a person like Lopez who had not only contributed to the fun of the game, but was also a real hero from the whole incident. With this offer from Miller, Lopez can take a breath of fresh air in relief. The speculation about the tax liabilities and the anxiety of receiving a hefty bill from the IRS are now over. However, the Miller Company will need to gross up this tax payment gift or else, Lopez will be left with a new tax burden of paying taxes for this Miller tax payment gift!

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Continuing Fight for Inclusion of Same Sex Marriage to the IRS Tax Code

August 15, 2011 By

According to the Section 3 of the Defense of Marriage Act (DOMA), a marriage for Federal purposes is a legal union between a man and a woman and “a spouse” refers to a person of the opposite sex. The Federal law therefore, does not recognize same sex marriages in spite of many states legalizing the same. However, the exclusion of same sex marriages in the Federal law has been a debate over the years. Many have argues that the DOMA is unconstitutional and that it violates the rights of citizens. This is especially the case in taxes, as same sex marriage partners are not allowed to file IRS taxes jointly (as is the case with their heterosexual counterparts).

There are several civil rights activists who are pushing for the inclusion of same sex marriage into the Federal law. Activist groups such as “Refuse to Lie” advocate to their followers to indicate in their tax returns that they are married according to the state law and file separately only because the Federal law requires so.

Besides such activist movements, there are also pending court cases that challenge the constitutionality of the DOMA. The Department of Justice under the Obama administration, which is the guardian of the Federal law, has chosen not to defend the DOMA and instead, has opted to agree with the opponents that indeed, the DOMA is unconstitutional. This has left conservatives with the tough task of defending the DOMA outside government help. The court cases are still pending in court. Besides these legal battles, there are also further developments that have worked to complicate the position of the IRS to turn down a same-sex-marriage option to file jointly.

In 2011, New York joined the band wagon and legalized same sex marriages in the state. However, the legalizing of same sex marriages in New York has a twist that makes the DOMA stand on marriage even more complicated. The New York same sex law does not require any residence status in New York. This means that citizens of the U.S. from other states can come into New York, get married (as same sex couples), and go back to their states of residence. Given that New York is a major state in America, this means that same sex marriage will proliferate, even in the conservative states that still uphold heterosexual relationships only. According to analysts, this “no residence” aspect will increase the pressure against the legality of the DOMA.

One of the activists at the helm of the fight for the inclusion of same sex marriages into the Federal law is William Stevenson. Stevenson is a member of both the IRS Commissioner’s Advisory Group and the National Council for Taxpayer Advocacy. He is also the president of the National Tax Consultants, an advocacy organization operating from Merrick, New York. Stevenson has been in the forefront of fighting for various taxpayers’ rights in the past with considerable success. Therefore, supporting the action for inclusion of same sex marriages into the Federal law from a tax perspective has been seen as a great plus for the DOMA opponents. As part of his activism, Stevenson is now circulating a letter that is challenging the IRS on its stand against same sex couples filing jointly. In his letter, Stevenson highlights the plight of the new New York law that provides for non-residency in the same sex marriage law and the tax disadvantages that the same sex couples have in comparison to heterosexual couples. One of the main disadvantages for same sex couples is being excluded from the advantages of the Estate tax law for married couples. The Estate Law allows spouses to transfer wealth between each other with no tax implications, which can be a huge tax saving.

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