On August 29, the IRS announced that all legally married same-sex couples will be treated as married for federal tax purposes, effective for returns filed on or after September 16, 2013. This includes Federal income tax, gift tax, estate tax, payroll tax and more. The IRS clarifies that this not only affects same-sex couples living in states that recognize same-sex marriage, but it also applies to same-sex couples that are wed in a state that recognizes same-sex marriage, regardless of where they currently live.
For example, if a Pennsylvania same-sex couple legally marries in New York State, and then returns to live in Pennsylvania, that couple would then be required to file as Married-Filing-Joint or Married-Filing-Separately on their federal income tax return. In addition to the requirement for 2013 and all subsequent years, the IRS gives same-sex couples the option to amend any prior year returns which still have an open statute of limitations, if it would benefit the couple. These years would generally include 2010-2012.
Depending on each couple’s tax situation, the effects of this change will allow either a great opportunity to receive a large refund or it will be a very expensive change. There could be both benefits and drawbacks resulting from the capital loss carryover rules, passive activity loss rules, and limitations on charitable or medical deductions. In addition, taxation of social security benefits, tax credits, Alternative Minimum Tax calculations, and preclusion of the Head of Household filing status must be considered.
There are some very important dates to keep in mind for this change:
- September 16, 2013. If a couple being affected by this law has not filed his or her 2012 tax return by the enactment date of this change, they will be required to file as married for 2012, as well. Third-quarter estimates may need to be recalculated to account for the change in filing status and the effects of the combined income and deductions.
- The date three years after the date the 2009 return was filed. Assuming both spouses extended their 2009 return and filed late in the summer, this is when the statute of limitations ends for 2009, and an amended return may still be possible.
- December 31, 2013 – Tax implications should be the last thing considered when planning a wedding, but a couple (both same-sex and opposite-sex) may want to delay or push-up the nuptials to accomplish their desired tax results.
- April 15, 2014, 2015, 2016 –These dates generally close the statute of limitations on amending un-extended returns for 2010, 2011, and 2012.
If you would like to learn more about the possibility of amending prior-year returns or need to update calculations for 2013 and beyond, please contact your RKL service provider or Molly L. Ramos at email@example.com (717) 291-0656.
Contributed by Molly L. Ramos, CPA, a manager in RKL’s Tax Services Group. Molly specializes in individual tax, trusts, estates, gifts and not-for-profit organizations.