Earlier this summer the Supreme Court struck down the federal Defense of Marriage Act (DOMA), paving the way for federal recognition of same-sex marriages performed in states that allow them. Last week, the IRS followed up by issuing an extensive set of rules governing how legally married same-sex couples will be impacted for tax purposes.
- If this applies to you personally, please contact your AKM CPA right away. We will help you plot the appropriate tax strategy looking forward and determine whether we should amend past filings.
- Employers who provide benefits to same-sex couples should stay tuned; refunds may be due on some payroll taxes paid.
- Please pass this along to anyone you know to whom it applies. An AKM CPA will be glad to assist anyone you refer to us.
First off, the IRS now recognizes ALL legally married same-sex couples for tax purposes. For a marriage to be considered legal, it must have been performed in a state that recognizes same-sex marriage. The couple’s current state of residence does not matter.
In practical terms this means:
- Same-sex married couples will have to determine their filing status: married filing jointly or married filing separately for all tax years beginning with 2013 – and with all returns filed after September 16, 2013. There are potential advantages and disadvantages to each, depending on your particular situation. However, if you are on an extension, it may be to your benefit to act before September 16, 2013.
- Couples who were legally married in one state but live in a state that does not recognize same-sex marriage will initially need to develop separate state and federal tax strategies.
- Some benefits that were previously subject to income tax – such as employer-sponsored health insurance for same-sex spouses – no longer are. It may make sense to file for a refund for income taxes paid.
- The landscape for estate and gift taxes has changed profoundly. Legally married same-sex couples will want to revisit their estate plans to ensure that they are properly constructed to reflect the new circumstances, which are generally far more beneficial.
Refunds may be available
In keeping with the new rules, the IRS will accept amended returns for a limited time. The general window for amended returns is the later of:
- Three years from the date the return was filed.
- Two years from the date the tax was paid.
For most taxpayers, this has the potential to put tax years 2009, 2010, 2011 and 2012 in play.
While amended returns are not required, it may make sense to file one reflecting marital status if:
- One spouse was covered under the other’s employer-sponsored benefit plan, such as health insurance.
- There is a significant gap in the spouses’ incomes.
- One spouse functions primarily as a caregiver for a child or other dependent.
Additionally, if one spouse died during the past three years, it is probably worthwhile toreview all estate tax filings; tax law is considerably kinder to married beneficiaries.
Finally, note that employers may also be eligible for refunds of payroll taxes paid on same-sex spousal benefits. The IRS has not yet issued guidelines for submitting a claim.
Contact your AKM CPA
Needless to say, sorting all of this out will take some doing and will require most same-sex couples to learn new approaches to tax planning. Your AKM CPA stands ready to assist you – or anyone you may know – with any aspect of the new IRS regulations concerning same-sex spouses.