The IRS today released more details on the tax implications of the Defense of Marriage Act being struck down.
The IRS says it will recognize same-sex marriages based on the state of celebration, regardless of where the couple lives. This means that a couple that holds a marriage certificate from a state such as Iowa can move to a state such as Nebraska, which doesn’t recognize same-gender marriages, and still be considered married for federal tax purposes.
Couples in same-sex marriages will be required to file their 2013 taxes as married. Couples may, but are not required to, amend prior-year returns (as far back as 2010) if filing as married would have benefited them.
There are 2 unknowns:
(UPDATE 8/30/13: Unknown #1 is now a “known,” as the IRS made the revenue ruling available to the public not long after this blog post was published. Click here for more details on how to handle a situation where one spouse has filed and the other one hasn’t.
One: What if one spouse filed a 2012 tax return as unmarried but the other spouse is on extension and hasn’t filed yet? Based on the wording of the IRS press release, it appears that the other spouse could choose to file 2012 as single:
“Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.” Unfortunately, the IRS Revenue Ruling hasn’t been published yet (only the press release has been published as of 2 pm Thursday), so I can’t say with 100% certainty that the spouse in this situation could choose to file as single.
Two: What About Taxation of Health Insurance and Claiming Refunds of FICA and Other Payroll Taxes?
Per the IRS press release:
Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.
So the short answer is: we don’t know how this will work yet.