Same-sex Marriage, Amended Tax Returns and Filing Status

flag-36423_1280I’ve pondered this question several times and not found a good answer .. until now (I think). 

The question regarded filing status on amended tax returns filed for 2011 or 2012 by someone in a same-sex marriage in those years. The original return used a filing status of single (because of the Defense of Marriage Act). They choose not to amend to file a joint return with their spouse. But they discover something — perhaps a missed deduction, or whatever — and they now want to amend that prior-year return.

Can they amend and keep their filing status as single, or must they use married?

I’ve twisted myself in knots over this issue in various posts on this blog. At first, I said that amended return must use a filing status of married.

Later, I speculated that one could maybe filing as single if filing status wasn’t relevant to the thing(s) being changed.

And now, I think I’ve found the answer … in the instructions to the Form 1040X (the form you file to amend a tax return):

Same-sex spouses. You may amend a return filed before September 16, 2013, to change your filing status to married filing separately or married filing jointly. But you are not required to change your filing status on a prior return, even if you amend that return for another reason. In either case, your amended return must be consistent with the filing status you choose.

So if you’re in a same-sex marriage and you’re amending a 2011 or 2012 tax return, you can file that amended return as married or keep your filing status as single.

Image courtesy of user Nemo on Pixabay.com

Same-sex Marriage and State Taxes: 2014

flag-36423_1280This year has seen the repeal of more state bans against same-sex marriage. Thirty-two states and the District of Columbia now recognize same-sex marriages. Additionally, Missouri recognizes same-sex marriages conducted outside the state, even though such marriages cannot be performed in Missouri.

How does all of this affect taxes?

Federal

The federal government recognizes all same-sex marriages. If a couple has a valid marriage license from a state that recognizes the marriage, then the couple is considered married for federal taxes, even if they are currently living in one of the remaining states that doesn’t recognize same-sex marriage.

Bottom line for taxes: same-sex couples file their federal taxes as married.

State

Things are still tricky at the state level. If a same-sex couple is filing a state tax return for one of the 30 states that now recognize same-sex marriage, they’ll file that return as married.

It’s trickier if the couple has a filing obligation in a state that doesn’t recognize their marriage.

Non-Recognition States

For example, Nebraska still doesn’t recognize same-sex marriage. A couple from Omaha could cross the Missouri River into Iowa, get a marriage license from Iowa, and go back to Nebraska, where Nebraska would not recognize their marriage.

But because the marriage license is from Iowa, the federal government recognizes the marriage. That couple would file as married on their federal taxes, but as two single people on their Nebraska tax return.

Multiple States

It gets even trickier if we’re talking about filings in multiple states. If the couple in the example in the last paragraph has filing obligations in Iowa and Nebraska (extremely common for people living in western Iowa and eastern Nebraska), they would file their federal taxes and Iowa taxes as married, but their Nebraska taxes as two single people. They would likely need to perform recalculations of their tax situation to fill out their Nebraska taxes.

Image courtesy of user Nemo on Pixabay.com

Updated Wisconsin Tax Guidance for Same-Sex Married Couples

flag-36423_1280Earlier this month, the U.S. Supreme Court declined to hear appeals to cases overturning same-sex marriage bans in several states, including Wisconsin.

As a result, same-sex marriage is now legal in those states.

From a tax perspective, Wisconsin released guidance earlier this week saying that couples in same-sex marriage can now file joint Wisconsin tax returns. Previously, Wisconsin had said same-sex couples needed to file separate Wisconsin tax returns as single people, and recalculations may need to be done in arriving at Wisconsin taxes. That all goes away now:

Previously, same-sex couples who filed a joint federal tax return were required to file as single or head of household for Wisconsin. Schedule S was used to separate the income reported on the federal joint tax return to the separate Wisconsin returns. Schedule S should no longer be filed with a Wisconsin tax return.

Determining filing status

A couple is considered married for the whole year if they were lawfully married as of December 31. If a spouse dies during the year, the couple may file a joint return for the year unless the surviving spouse remarries during the year. Lawfully married means a valid marriage in a state that recognizes same-sex marriage.

Filing returns

2014 individual income tax returns
A lawfully married same-sex couple must file their Wisconsin individual income tax returns as married filing jointly, married filing separately or, if qualified, as head of household.

2013 and prior returns filed on or after October 16, 2014
A lawfully married same-sex couple must file their Wisconsin individual income tax returns as married filing jointly, married filing separately or, if qualified, as head of household.

2013 and prior returns filed before October 16, 2014
A lawfully married same-sex couple who already filed their tax returns, may choose (but are not required) to amend their Wisconsin tax returns using Form 1X, claiming a filing status of married filing jointly, married filing separately or, if qualified, as head of household. Prior returns may be amended as long as the period of limitations has not expired.

From a news release on the Wisconsin Department of Revenue website.

Image courtesy of user Nemo on Pixabay.com

Taxpayer Advocate Says IRS Issues Too Many FAQs

ID-10094159This was recently in my e-mail inbox from PPC:

National Taxpayer Advocate, Nina Olson, spoke at a recent accounting conference, addressing the IRS’s practice of increasingly providing significant guidance in the form of Frequently Asked Questions (FAQs) and other formats that aren’t published guidance. There are a number of ways that this can be problematic, including the fact that such guidance can be changed without notice. It is also unclear who writes FAQs (i.e., no contact name is listed, which is typically provided in published guidance), what type of vetting process they are subject to prior to online publication, and the extent (if any) to which taxpayers can rely on them, which is especially problematic when the FAQs are the primary guidance available on a topic.

From PPC’s “Five-Minute Tax Update” on 7/30/14

I agree. Too many FAQs and not enough facts.

Take the example of something I wrote about a few weeks ago regarding same-gender marriages and the impact of last year’s DOMA ruling where DOMA got struck down.

My take on the official IRS response to the DOMA ruling (Notice 2013-17) is that any tax return filed with the IRS after September 16, 2013, by a person in a same-gender must use a filing status of “married.”

But then the IRS — in a news release (!) — later said that using a status of “married” was optional on prior-year amended tax returns. This was in a paragraph tacked onto the end of a news release about something completely unrelated to same-gender marriage.

I won’t belabor the point here because I already wrote about it in this blog post from June.

But the overall point is, things like FAQs and news releases are  no substitute for coherent, authoritative guidance.

Can one cite a FAQ or news release as defense in an audit? Doubtful.

I’ll be interested in seeing if the IRS responds to Ms. Olson’s statements. That seems doubtful too.

Image courtesy of Stuart Miles / freedigitalphotos.net

Life After DOMA: A History of Marriage in the Tax Code

One of my special research projects has been to research the history of marriage in the U.S. Tax Code.

I started this project nearly 3 years ago. Around this time, my practice became heavily involved in helping couples in same-gender marriages navigate the tax complexities they faced when the Defense of Marriage Act existed.

A common theme in the media and among clients was (and still is) that marriage will “always” result in bigger refunds at tax time. This simply is not true.

I knew about the so-called “marriage penalty” and how, historically, approximately 50% of married couples will see their tax liability increase as a result of getting married.

But I didn’t know why there was a marriage penalty. I don’t like not knowing why.

So I set out to find out.

Three years later, I’m still researching but have created a draft manuscript and have more than 4,000 words written on a lengthy essay about the history of marriage in the tax code.

Over the months to come — okay, probably the years to come — I’ll be sharing parts of this manuscript. It’s an ongoing project and I don’t know yet how often I’ll be posting parts of it here. I also don’t know when it will be finished or what the finished product will look like.

But I think it’s fascinating stuff, so I have to share it. Stay tuned.