California RDPs must Split Income

The IRS Chief Counsel has issued a formal advice memo to IRS examiners (and tax practitioners) concerning California Registered Domestic Partners (RDPs). Based on California's community property laws, RDPs must now each report half their community-property income. This includes earned income (wages, salary, self-employed) as well as investment income. This is effective January 1, 2007.

Taxpayers are allowed but not required to amend their returns for 2007-2009.

What this means to California RDPs is that while they must file as "single" on their federal tax return, they only report have their income. But they must also report half of their partner's income. RDPs will continue to file as married (married-filing-joint or married-filing-separate) on their California return.