Michigan Treasury Retracts Tax Demand Letter Sent to Same-Sex Married Couples

Saying it was an error and offering an apology, the Michigan Department of Treasury has rescinded an earlier letter sent to some same-sex married couples that indicated they owed additional taxes.

The letter, sent in late April to 130 married same-sex couples, asked why the income declared on their 2013 state tax returns was different from what they reported on their federal tax returns. Those receiving the letter had filed their federal returns jointly but paid state taxes as individuals, per the law at the time. It threatened to seize recipients’ bank accounts if they did not provide either documentation explaining the discrepancy or pay a substantial amount more in Michigan state tax by a deadline.

The Department of Treasury received complaints from LGBT advocacy groups, as well as tax lawyers and accountants, who pointed out the letter seemed like harassment targeting same-sex married couples who were just following state law at the time. Recipients, it was noted, also had to spend significant time and money preparing detailed documentation showing why their 2013 state and federal tax returns did not match.

In its statement rescinding the letter, the Department of Treasury said the communication was sent out “erroneously” and happened due to a routine review of 2013 returns that flagged some as “mismatched based on inconsistent Adjusted Gross Income (AGI) figures that were actually correct.” The letter said those flagged were primarily “same-sex couples who were allowed to file a joint federal tax return [in 2013] but were not yet able to file a joint state return.”

The statement goes onto clarify that recipients “do not owe an additional tax and no further action is required.” It noted they will also receive a second letter from the Department of Treasury notifying them that they can disregard the first one. The statement concluded by saying “Treasury deeply regrets this error and apologizes for any hardship our actions may have caused taxpayers.”

Thankfully, the Department of Treasury has recognized its error. However, the letters caused significant stress and worry for recipients. It also forced them to remember a time when they were not treated equally under the law – something that was no doubt very painful for many. Hopefully the state has learned from this and will adjust its flagging and review mechanisms accordingly.

This is also a reminder that, despite progress, same-sex couples still have unique legal and tax issues that often require specialized counsel. If you ever receive communications from the Michigan Department of Treasury or any government agency that cause concern or raise questions, we would be happy to discuss them with you.

Posted in LGBT Law.