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Tuesday, November 5, 2013

Many tax questions on same-sex federal tax filings

I think the IRS did a good job getting real guidance issued on the meaning of the U.S. Supreme Court's finding that Section 3 of DOMA is unconstitutional. On August 29, 2013, the IRS issued Revenue Ruling 2013-17 (binding guidance) and some new FAQs (not binding, but often just restating the binding guidance).

Key points of the ruling:
  • The Internal Revenue Code and regulations should be read in a gender neutral manner. This is helpful because there are several references in both to "husband and wife" rather than always "spouse."
  • For federal tax purposes, a state of celebration approach is used to determine if a couple is married. Thus, if they are married in any state, DC or foreign country allowed to confer marriage status, they are married, even if they live in a state that does not recognize the marriage.
  • Couples in a registered domestic partnership or civil union are not considered married for federal tax purposes.
The ruling is effective for returns filed after 9/15/13. Thus, same-sex married couples will definitely have to file either as married filing joint (MFJ) or separate (MFS) for 2013. Amended returns can be filed, if desired, for earlier years still open under the statute of limitations.

This ruling, as well as the FAQs and Notice 2013-61 on how employers can obtain FICA refunds for excess FICA paid on income that had to be reported for workers who had spousal benefits.

There are still several open issues and likely more will be found as people go forward, as well as work to amend prior year income, payroll, gift and estate returns and plans.  I was pleased to have the opportunity to work with several other members of the AICPA to create a list of these issues. The AICPA sent the letter to the IRS on 10/30/13. Here are two of the several topics noted in the letter:
  • "The IRS should clarify if the taxpayer would also need to change the filing status if a same-sex married spouse needs to amend a prior return filed as single or head-of-household to make an adjustment unrelated to marital status. While this form is an amended return filed after September 15, 2013, it is not filed “in reliance on” Rev. Rul. 2013-17."
  • "The IRS should clarify whether a same-sex married employee who requests that his/her employer file to obtain a FICA tax refund must also amend his/her Form 1040 to change the filing status."
What do you think? Have you run across additional areas in need of guidance? 

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