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Tag Archive for DOMA

Now That Same-Sex Marriage Is Legal In All States, What Are The Tax Implications?

On June 26, the Supreme Court ruled that the Fourteenth Amendment to the Constitution requires all states to license marriages between two people of the same sex and to recognize same-sex marriages performed in other states. This comes approximately two years after the Supreme Court overturned the Defense of Marriage Act (DOMA) enacted by Congress and signed by then President Bill Clinton. DOMA defined marriage as “legal union between one man and one woman as husband and wife.”

This has wide-ranging implications for married individuals who reside in states that until now have not recognized same-sex marriage and for those who can now marry in their state, including employer-provided employee and spousal benefits, retirement issues, Social Security benefits, and of course tax issues. Read more

DOMA Tax Issues – Still Outstanding

Someone recently asked me what federal tax issues are still outstanding regarding DOMA and the effect of the June 2013 Windsor decision. There are still a few income tax issues that come to mind (there are also estate and gift and state tax issues as well), that were not covered in the initial guidance (Rev. Rul. 2013-17). Here is my list. Do you have any input or additional ones to add?

Amended Returns

Will the IRS issue guidance to assist in the filing of amended returns? The current version of Form 1040X is not conducive to showing how two prior separate returns will now be treated as one MFJ return. Read more

Newly Wed And Starry Eyed… Here Are Some Tax Tips To Remember

We were attending a dear friend’s daughter’s engagement when this thought occurred to me that most newly weds don’t think of the change in their Tax Filing Status till Tax Time. Yes, blame it on my tax “nerd”i-ness!! I don’t mean to burst the newly wed pink bubble, but these are important things to remember!

Now that DOMA, Section 3 has been over-turned by the Supreme Court as well, there’s even more details to keep in mind.

Here are several tips for newlyweds from the Internal Revenue Service:

• It’s important that the names and Social Security numbers that you put on your tax return match your Social Security Administration records. If you have changed your name, report Read more

DOMA Decision, Federal Taxes And State Of Marriage

TaxConnections Picture - Marriage CelebrationOn June 26, 2013, the United States Supreme Court found Sec. 3 of DOMA (the Defense of Marriage Act) to be unconstitutional (U.S. v. Windsor). Basically, the Court found a violation of equal protection of the 5th Amendment to treat a same-sex marriage with less respect than an opposite-sex marriage.

There are a variety of federal tax issues associated with the decision. The Internal Rev website still says (since the decision was handed down) that they will move swiftly to update guidance on this topic.

One area I’d like to see the IRS address first is to state that for federal tax purposes, marriage is defined per the state of celebration (where performed) rather than the state of domicile. Some states do not recognize same-sex marriage. So, a couple married, say, in California would not be viewed as married by Texas. If the federal tax law treats a couple as married based on the treatment of their state of domicile, it seems that there would be a problem under the Windsor decision because then the federal government is not treating all marriages as equal. The couple married in California is still married (at least per California law and that of some other states) if they live in a state that does not recognize it. Can the federal government say they are not married based on where they live? It seems contrary to the Windsor decision.

But, we await guidance from the IRS. Hopefully that “guidance” will be in the form of binding guidance rather than the Chief Counsel Advices and FAQs that currently exist. Read more

Tax Implications Resulting From Demise Of The Defense Of Marriage Act (DOMA)

TaxConnections Picture - Gay GroomsDOMA defined marriage as a union between a man and a woman. The case involved a same-sex couple who were married in Canada. One spouse died but the other spouse was not allowed to use the unlimited marital deduction resulting in $340,000 additional estate taxes [J.K. Lasser’s Monthly Tax Letter, August 2013]. The Act was declared unconstitutional by the United States Supreme Court [Windsor, No. 12-307, 6/26/13]. Under the Act, same-sex couples, who were married and resided in states sanctioning same-sex marriage, did not have the same rights under federal tax law as did different-sex married couples. That meant they were not allowed to file a joint income tax return or use the unlimited marital deduction for estate and gift taxes. This deduction enables the unused estate tax exemption of the first deceased spouse to be used by the surviving spouse. After the Supreme Court decision, same-sex married couples, residing in states that sanction gay marriage, will now be afforded the same rights as different-sex married couples for federal income, estate, and gift tax purposes [J.K. Lasser’s Monthly Tax Letter, August 2013]. Same-sex married couples must now file a joint return or separate returns. If they file a joint return, they may be subject to the “marriage penalty” if both spouses work and earn income over a certain threshold. If only one person in the couple works, they will have a reduction in their taxes. They can no longer file as single or head of household, but head of household and innocent spouse status may be applicable in the same circumstances as it is for different-sex married couples (see previous article on filing status by this author). Read more

Tax Implications Of The DOMA Case

Gay GroomsThe Supreme Court just overturned DOMA which allows for same sex couples that are legally married to obtain federal benefits.  How did this come about?  Of course it was the tax case of a same sex couple that was legally married in their state and went to court against the IRS regarding the application of the federal estate tax laws to that couple.  This isn’t the first time that a tax has made major news.  The healthcare bill was ruled constitutional because it was deemed to be a tax.  Al Capone wasn’t convicted of any violent crimes; he was convicted of tax fraud.  Surprisingly often the tax cases can turn into landmark cases that have shaped the path of major legislation in this country.

In Minnesota, same sex couples will be allowed to legally marry starting August 1st after the voters decided not to ban same sex marriage in November and then the legislature legalized it in May.  So what does this Supreme Court ruling mean for a MN couple?  It means people in MN who are legally married can get federal benefits; practically speaking many of these benefits are tied to taxes.  It means they can file a joint tax return on both their federal and Minnesota tax returns.  I think everyone can agree that is a much simpler system than what previously existed where same sex couples would have to file separate federal returns and then could file joint state returns which was just a mess for everyone involved.

There is still going to be some messy tax situations for same sex couples, but this ruling at least allows for simplicity in the 12 states that do recognize same sex marriage.  If you get married in one of the 12 states that allow Read more

United States Supreme Court DOMA Throw Down – Progress or Kabuki Theater?

iStock_Marriage CelebrationXSmallThe fact of the matter is that the Internal Revenue Service will continue to define marriage for United States Taxpayers everywhere in that only one man and one woman married to each other can file an income tax return with the filing status of married/joint. This filing status, looked upon by the Service as one taxpaying unit is entitled to substantial tax benefits over and above all other filing statuses be it Single, Head of Household, Married/separate, or Widow. So from an income tax perspective today’s supreme court decision is really in my opinion little more than kabuki theater.

If you check out the IRS’ Interactive Tax Assistant to determine your filing status you will find it to be incredibly disingenuous if not unilaterally misleading as the Instructions for the 2012 IRS Form 1040 Income Tax Return clearly state under under filing status the following.

“For federal tax purposes a marriage means only a legal union between a man and a woman as husband and wife, and the word “spouse” means a person of the opposite sex who is a husband or a wife.” 

In my own humble opinion until you can check the box Married/Joint on an income tax return (box #2 under filing status) you are unfortunately NOT married for federal income tax purposes regardless of the Supreme Court’s decision today and I find it impossible at this time or any time in the near future that the IRS will be compelled to change their definition of the Married Filing Joint (MFJ) filing status. Read more

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