IRS Confirms ALL Same-Sex Spouses, Even Florida Residents, Qualify for Federal Tax Benefits

Updated September 24th, 2013

Some Tax Savings are Contingent on Taking Immediate Action!

In June, in the highly-publicized case of U.S. v. Windsor, the U.S. Supreme Court held unconstitutional the Defense of Marriage Act (DOMA) provision that defined “marriage,” for purposes of all federal laws, as between one man and one woman.  The case resulted in the extension of over 1,100 federal benefits, including several tax benefits, to same-sex married couples; however, it also confirmed that the states retain jurisdiction over marriage policy.  Thus, a debate raged over whether federal benefits were available to same-sex married couples residing in “non-recognition” states, such as Florida, which prohibit same-sex marriage within their borders AND refuse to recognize same-sex marriages validly performed in other jurisdictions.

In Revenue Ruling 2013-17, the U.S. Treasury Department and IRS ended the debate by adopting a rule that recognizes every same-sex marriage validly performed in a U.S. or foreign jurisdiction, even if the spouses are domiciled in a non-recognition state.  It is now clear that, going forward, married same-sex couples residing in Florida will be treated the same as their opposite-sex counterparts for all federal tax purposes.

Note, however, that such tax treatment does not extend to unmarried individuals, whether same-sex or opposite sex, who have entered into a registered domestic partnership, civil union or other similar relationship recognized under state law.

The Revenue Ruling sets the ground rules for the filing status of same-sex spouses for their federal individual income tax returns.  Those rules vary depending on the tax year and the date by which the return is filed.  In some cases, the same-sex couple’s options are limited depending on when they file.  Therefore, same-sex spouses should consult their tax professionals IMMEDIATELY.

• 2013 and future years.  All same-sex spouses will be required to file their federal returns as either “married filing jointly” or “married filing separately.”

• 2012 returns that are still on extension.

• • If the couple was married in 2012 and filed their 2012 return(s) BEFORE September 16, 2013, they had the option to file as unmarried, “married filing jointly” or “married filing separately.”  In some, but not all cases, filing as unmarried will result in less tax than filing as married.

• • If the couple was married in 2012 and files their 2012 return(s) ON OR AFTER September 16, 2013, they are limited to choosing between “married filing jointly” or “married filing separately.”

• Amending prior tax returns.  For prior year returns, including 2012 returns that have already been filed, if the couple was married during the year, they MAY file an amended return to change their filing status from unmarried (as was required under DOMA) to “married filing jointly” or “married filing separately.”  However, a return may be amended only if the statute of limitations is still open.  Generally, the limitations period is 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later.  For example, for 2009 returns that were filed on October 15, 2010 (the extended due date), the deadline to file an amended return is October 15, 2013.

Thus, whether or not they have already filed their 2012 returns, same-sex spouses should consult their tax professionals right away to discuss their options, including amending returns to reap tax refunds.

The Revenue Ruling did not address the estate or gift tax consequences of the Windsor case, other than noting the proper form to be used to apply for an estate or gift tax refund.  Additional guidance from the IRS is anticipated.  In the meantime, same-sex spouses and the executors of their estates should consider filing or amending estate or gift tax returns to take advantage of the “unlimited marital deduction,” spousal “gift-splitting” or “portability” of the estate tax exemption between spouses.  These topics are beyond the scope of this article but should be carefully reviewed by same-sex couples with the help of their tax advisors.