Originally published on Forbes.com Aug 29th, 2013
The IRS has announced how it will be handling same-sex marriages in light of the Supreme Court’s ruling in the Edith Windsor case. In the Windsor decision, the Court ruled that Section 3 of the Defense of Marriage Act, which denied federal recognition to same sex marriages was unconstitutional. There were hanging questions about how far-reaching the decision was and the Service has now outlined its position on the more pressing concerns.
A Marriage Is A Marriage Is A Marriage
If a couple is married in a jurisdiction (including a foreign country) that recognizes same-sex marriage, that marriage will be recognized for all federal tax purposes regardless of the law in the jurisdiction where they reside. This was probably the most troubling question and LGBT advocates will probably like this answer.
A Not Marriage Is A Not Marriage Is A Not Marriage
There was some speculation that civil unions and registered domestic partnerships might be recognized as marriages for federal tax purposes. The IRS did not go that far. If the state where it is performed does not recognize the arrangement as a marriage, it is not a marriage for federal purposes.
Be Careful What You Wish For
There are a variety of circumstances where a couple will end up with a better tax result if they are not married than if they are. Beginning with 2013 returns, same sex married couples will not have the option of filing as single, even if that would give them a better result. Apparently, it is still an option for extended 2012 returns.
Get Those Refund Claims Going
The news release mentioned refund possibilities:
Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011, and 2012. 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.
Additionally, 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 pre-tax and excludable from income.
With respect to extended 2009 returns, remember that even though your extended due date was October 15, 2010, the statute started running when you filed.
Employers who paid social security taxes on health care benefits provided to same sex spouses of employees may also be eligible for refunds.
A Cheer And A Half For The IRS
Ignoring whether the marriage is legal in the state of residence is a big relief. It would have been crazy making the other way. It is too bad that civil unions will not be recognized, though.
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