IRS’ 1099-INT a Headache for Gay Couples

1. Marv Dumon for Business2Community writes: Filing a 1099-MISC form with the Internal Revenue Service (IRS) can be a simple process for most independent contractors.  However, the U.S. Supreme Court’s recent decision to strike down a key provision of the 1990s-era Defense of Marriage Act (DOMA) presents bureaucratic hurdles for the gay and lesbian community when it comes to dealing with taxes. The 1099-INT is a little known form sent from banks which states how much interest has been paid to the account holder.  Banks also report this information to the IRS. For unmarried couples who share an account, the first account holder should issue a separate 1099-INT to his or her partner and then file a Form 1096 with the IRS to alert the government that the interest was split between two parties.  Needless to say, much of the gay and lesbian community isn’t aware of this paperwork requirement. It also highlights how complexity in federal and state laws poses legal risks for same-sex couples.  In addition to taxes, gay couples face complicated issues when it comes to insurance, healthcare, hospital visitation rights, estate planning, and reporting requirements with government agencies.
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3. Tax Reporting Other 1099 forms can be much simpler, although the IRS in recent years has progressively sought more information from American taxpayers.  Critics in the U.S. congress, including House Republicans, are calling for a reduction in the IRS’ budget by as much as 24 percent. Individuals who have worked as independent contractors need to file a 1099-MISC if they earned more than $600 during the year, according to Erich Ruth of 1099fire.com, a tax software firm based in Arizona. “Changes to the existing forms like the 1099-MISC is the IRS effort to get more information about a certain transaction, “says Ruth.  “[1099 forms] exist because the IRS wants information. Over the years, the IRS is looking for more information and has created new forms and new mandates to get that information, such as IRS Form 3921, 3922, 1099-K.” One of the benefits of filing a 1099-MISC is the luxury of claiming work-related deductions. On the Schedule C portion of your form, you can claim business expenses that the IRS deems “ordinary” or “necessary;” expenses that allow you to continue your self-employment activities. 
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5. However, knowing what is ordinary or necessary can be confusing. As an example, an ordinary or necessary expense would be upgrading your computer so you can continue working as usual, to which you could deduct this from your form. However, renting a sports car to drive to meet a client may be useful for getting extra work, but you probably would not be able to deduct the rental of the sports car from the 1099-MISC. Of course, if you have any questions, consult a tax professional. Alternatively, for deductions that are $5,000 or less, you have the option of filing the Schedule C-EZ. “The IRS has the ability to double check what the payer submitted on the 1099 with what the recipient submits on their 1040,” says Ruth.  “If those numbers don’t match, then the recipient gets a little asking for clarification.”