On August 29, 2013 the Department of the Treasury and IRS jointly announced issuance of tax filing guidance for same-sex couples in response to the U.S. Supreme Court decision in U.S. v. Windsor, 570 U.S. __, 133 S. Ct. 2675 (2013), (for more on the Windsor decision see post of July 5, 2013 re “Impact of the Supreme Court’s Decision…”).
Rev. Rul. 2013-17 provides the following:
1. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a person of the same-sex if the individuals are lawfully married under state law, and the term “marriage” includes such a marriage between individuals of the same-sex. (Note: for this purpose state includes the 50 states, the District of Columbia, a U.S. territory or a foreign country).
2. For Federal tax purposes, the Service adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same-sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.
3. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same-sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.
EFFECT ON OTHER REVENUE RULINGS
Rev. Rul. 58-66 is amplified and clarified. (This ruling had recognized for tax purposes legally created common law marriages even when the spouses were later domicile in a state not giving full faith and credit to common law marriage).
The holdings of this ruling will be applied prospectively as of September 16, 2013.
Except as provided below, affected taxpayers also may (emphasis added) rely on this revenue ruling for the purpose of filing original returns, amended returns, adjusted returns, or claims for credit or refund for any overpayment of tax resulting from these holdings, provided the applicable limitations period for filing such claim under section 6511 has not expired. If an affected taxpayer files an original return, amended return, adjusted return, or claim for credit or refund in reliance on this revenue ruling, all items required to be reported on the return or claim that are affected by the marital status of the taxpayer must be adjusted to be consistent with the marital status reported on the return or claim.
IR 2013-17 issued the same day by IRS indicates that claims for refund may but are not required to be filed during the appropriate limitations period. This means that 2010 through 2012 returns are open for amendment. Spouses whose 2009 return was filed on extension, however, may not file a claim for refund because the claims period for changing from Married Filing Separately to a Joint Return is based on the original due date, not the extended due date. The IRS explains how to amend:
- Same sex couples wishing to file a joint federal return should use Form 1040X.
- Donors or personal representatives seeking refunds of gift and estate taxes respectively should use Form 843.
- Employers may seek refunds of overpaid employment taxes on Form 941X (See www.IRS.gov posted Frequently Asked Question 12 in Answers to FAQS for Individuals of the Same Sex Who Are Married under State Law).
Under the ruling same-sex couples will be treated as married for all federal income, estate and gift tax purposes including (to list just some):
- Filing status (which for couples living together only may be Married Filing Separately (MFS) or Joint. Returns for 2013 cannot be filed using a filing status of single or Head of Household if the couple lives together).
- 2012 returns filed on or after 9/16/2013 will also be subject to the new rules and filing status for same-sex couples will be limited to joint or MFS.
- Claiming personal and dependency exemptions.
- Taking the standard deduction.
- Employee benefits (Refunds may be claimed for overpaid taxes due to employee provided health insurance being included in income).
- Contributing to an IRA.
- Claiming the earned income tax credit.
- Claiming the child tax credit.
NOT ANSWERED BY THE RULING
The ruling is a welcome and logical interpretation of how U.S. v. Windsor impacts federal tax matters. There remain some unanswered questions, however. Two that jump out are:
- Will states that do not recognize same-sex marriages follow federal law with respect to returns filed in their jurisdiction or require the couples to continue to file MFS returns there? Most likely, states prohibiting same-sex marriage will not follow the federal tax rule, even if taxable income on returns of those states is derived from the federal return numbers.
- Will couples wanting to amend to joint returns be required to file joint returns for all prior returns or will IRS permit them to cherry pick those years providing a benefit and ignore prior years resulting in a marriage penalty tax? The Rev. Rul. provides that taxpayers, “may but are not required,” to amend. Thus, it appears that amending is an election, the same election to file jointly or separately, they would have had if the law had previously recognized same-sex marriages. Thus, taxpayers should be able to choose to amend in any or none of the years still open under the statute of limitations.
© 2013 by Robert S. Steinberg, Esquire
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