Earlier this year, the Supreme Court’s ruling in the case of The United States v. Windsor essentially rendered the federal Defense of Marriage Act unconstitutional.
Our earlier blog post mentioned that the Internal Revenue Service promised that additional guidance would be forthcoming. The IRS has made good on its promise by issuing Revenue Ruling 2013-17 that was intended to address the practicalities of applying the Supreme Court’s decision. The key takeaways from this ruling are:
- IRS has clarified that the terms, spouse, husband, wife, and husband and wife include same sex couples lawfully married under state law. Additionally, the IRS clarified that the term “marriage” includes a state law marriage between two individuals of the same sex. This distinction by the IRS is crucial as there are hundreds of tax provisions with references to the above terms, and it was unclear how these terms would be interpreted following the ruling.
- One of the earlier open questions at the time of our last blog post was whether residents of states, such as Ohio, with a constitutional amendment prohibiting same-sex marriage, will be treated as married for federal tax purposes. The IRS clarified that any same-sex marriage validly entered into under state law will be recognized for federal tax purposes even if the couple resides in a state that does not recognize same-sex marriage. Ohio same-sex couples legally married in another state or foreign jurisdiction will be treated as married for federal tax purposes, and, beginning in 2013, they must file a joint return or elect married but separate status. However, for state tax purposes, an Ohio couple would still need to file separate individual Ohio tax returns until Ohio law changes.
- Furthermore, same-sex couples who are not legally married but have entered into a formal partnership or civil union under state law will not be treated as married for federal tax purposes. Residents in states such as Illinois who may have entered into a civil union and who receive favorable tax treatment under state law would not be treated as married for federal tax purposes.
For Individuals:
The IRS ruling applies prospectively beginning with tax returns filed after 9/15/2013. Legally married same sex couples must either file joint tax returns or married filing separate returns for federal tax purposes after that date (generally beginning with 2013 tax returns). Because taxpayers had until 10/15/2013 to file an extended 2012 individual tax return, some same-sex couples who filed their individual tax returns after 9/15/2013 were required to file jointly for 2012. Additionally, provided the statute of limitations is still open (generally three years), taxpayers may benefit from filing amended tax returns for prior years to elect to joint filing status.
For Businesses and Employees:
Prior to the ruling striking down DOMA, employees with same sex spouses would have received a Form W-2 that included the value of their spouse’s employer provided health care. The IRS ruling clarifies that employees may file an amended return to exclude the value of their spouse’s health coverage for any open tax year in which the employee was legally married. Additionally, the employer can file refund claims for the excess Social Security and Medicare taxes paid on the spouse’s health care coverage, but the IRS has yet to provide further guidance on the procedure for doing so.
The changes related to same sex marriage and tax law have been swift and continue to evolve. Contact a professional at Zinner & Co. who can help keep you updated with the most recent developments and determine the best course of action for you and your business.
