Should Registered Domestic Partners file Joint Returns?

Should Registered Domestic Partners file Joint Returns?

Several States, including California, are permitting couples to register as domestic partners. The issue is whether the are treated as "married" under the Internal Revnue Code. The Internal Revenue Service is still grappling with the issue, which is likely to have national ramifications.

The thorniest issue centers on the basic question of how to report income on a federal tax return. For example, if one partner earns $100,000 but a stay-at-home partner earns nothing, are they now entitled to report $50,000 of income on their individual returns? If the stay-home partner's $50,000 share isn't considered income, is it a taxable gift -- or something else?

Domestic partners can't assume they'll be safe simply reporting income separately, the way they did before the state law took effect, some experts say. If the IRS decides to treat domestic partners more like married couples, some could find out later that they owe taxes because they weren't entitled to tax breaks they claimed.