Earlier this summer, the Supreme Court ruled unconstitutional the provisions of the federal Defense of Marriage Act that prohibited same-sex married couples from utilizing the federal tax benefits accorded to heterosexual married couples. The specifics of the Windsor decision left ambiguous whether federal law would treat as “married” couples who were not considered married under state law in their state of residence. Today, the IRS announced unambiguously that same-sex couples who are legally married in any jurisdiction that recognizes their marriages, will be treated as married for federal tax purposes.
With Windsor, we weren’t sure whether an Oregon-resident, same-sex couple who got married in Washington would be able to file a joint federal income tax return, or be able to obtain nontaxable health benefits for a spouse through an employer. New York, where the couple in Windsor lived, permits same-sex marriage; the Oregon constitution currently prohibits it. The Windsor decision rests much of its argument on the federal government’s inability to deny a marriage granted under a citizen’s governing state law. This left same-sex Oregonian couples married in other states in limbo: law in the state of residence did not recognize their marriage. Would the federal government recognize it? Today, we have a clear answer: yes.
The IRS ruling applies only to couples who are actually married – registered domestic partnership status is not enough to trigger these changes.
Federal recognition of married status is generally good news for taxpayers with respect to employer-provided benefits, gift and estate tax, and recognition of dependents of either spouse. The income tax implications depend on the facts: if both spouses work at relatively high-paying jobs, filing with a married filing status will likely increase, not decrease income taxes. However, if only one spouse works, filing as married will reduce income tax.
Employers should consider whether they have paid employment taxes on the value of health benefits provided for the same-sex spouses of any of their employees. If they have, they may be able to file amended employment tax returns to claim a refund of those taxes.
An FAQ released simultaneously with the ruling explains that married same-sex couples must use a married filing status for their 2013 returns, and for any not-yet-filed 2012 (or earlier) returns that are filed on or after September 16, 2013. Any same-sex married couples whose 2012 return hasn’t been filed yet, who are better off using single filing status on their federal returns, should act quickly to file them prior to 9/16/13!
Affected taxpayers can opt to amend their returns for any open tax years (generally, the prior two or three tax returns) to use a married filing status, but are not required to do so.This blog post is a summary and is not intended as tax or legal advice. You should consult with your tax advisor to obtain specific advice with respect to your fact pattern. Based on the most recent “best practice” standards for tax advisors issued by the Treasury Department, commonly referred to as Circular 230, we wish to advise you that this blog post has not been prepared to be used, and cannot be used, to provide assurance that penalties which may be assessed by the IRS or other taxing authority (including specifically section 6662 understatement penalties) will not be upheld.