MLR

Clarified tax guidance for same-sex married couples

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There have been new developments in the aftermath of the Supreme Court decision that struck down Section 3 of the Defense of Marriage Act (U.S. v. Windsor, et. al., 111 AFTR 2d 2013-2385, June 26, 2013), which required same-sex spouses to be treated as unmarried for purposes of federal law.

Now the IRS has issued a ruling (Rev. Rul. 2013-17) concluding that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether or not the couple lives in a jurisdiction where same-sex marriage is recognized.

The ruling clarifies that same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions in which marriage is a factor, including:

  • Filing status
  • Claims of personal and dependency exemptions
  • Standard deductions
  • Employee benefits
  • IRA contributions
  • Earned income tax credit claims
  • Child tax credit claims

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships, even if recognized under state law.

The ruling concludes that legally married same-sex couples:

  • Generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status. Single filing status is not appropriate.
  • May file amended returns for prior years, if the tax year is still open under the statute of limitations.

Note that, in some cases, filing a joint return may result in a higher tax bill than the combined tax on two unmarried returns. The ruling concludes that same-sex couples who were married in prior years may, but are not required to, file amended returns. It is advisable to make the tax calculation both ways before deciding to amend a prior return.

Normally, the statute of limitations expires three years after the later of (a) the original due date of the return or (b) the date the return was actually filed, if filed after the due date. For most people, 2010, 2011 and 2012 are still open under the statute of limitations.

Some taxpayers may have special circumstances – such as signing an agreement with the IRS to keep the statute of limitations open – that permit them to file refund claims for tax years 2009 and earlier.

According to the ruling, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pretax and excludable from income.

For reasons not clearly stated in the ruling, the IRS will not accept amended returns filed prior to Sept. 16, 2013.

A subject not addressed in the ruling is whether the Supreme Court decision applies to years closed by the statute of limitations. While the IRS has no authority to open years that have closed, Congress may be pressured to take some sort of remedial action.