In one of its most controversial decisions, the Supreme Court on June 26 struck down Section 3 of the Defense of Marriage Act (DOMA) as unconstitutional, which required same-sex spouses to be treated as unmarried for Federal purposes. The decision will have a far-reaching impact on finances and taxes, with many outstanding questions that still need to be addressed. There are countless regulations and provisions that now need to be reexamined and clarified, especially in the area of income taxes and health care benefits. The following are the top 10 items that need answers to understand how same-sex marriages will be handled:
- For same-sex couples that were married years ago, must they amend prior year tax returns whether or not they have a refund? Many same-sex couples will get a refund by going back and amending their returns and filing jointly. However, there are going to be some that find amending their return will result in a larger tax bill. Will those taxpayers that end up paying more taxes be required to amend? We’ll have to wait and see.
- For same-sex couples that were married years ago, how far back can you amend a return? Taxpayers generally have up to three years to amend their tax returns for a refund. However, in this case taxpayers may be able to go back even further as the situation is not a mistake or miscalculation by the taxpayer. Expect the IRS to issue guidance on how to handle this.
- If you live in a state does not recognize same-sex marriages but were married in a state that did, can you still file jointly on the Federal return? Generally, the federal government recognizes the marital status on your resident state.
- If you live in a state does not recognize same-sex marriages but were married in a country that did, can you still file jointly on the Federal return? This is similar to #3 above, but the same-sex marriage takes place outside the country instead of in a different state.
- Will states that don’t issue marriage certificates in their home states acknowledge same-sex marriage that occurred outside their state for state tax purposes? Section 2 of DOMA, which allows States to refuse to recognize same-sex marriages performed under the laws of other States, wasn’t challenged in this case in the Supreme Court. We may see court cases arise to clarify this matter.
- Will employers need to provide health care to same-sex spouses in a state that does not recognize same-sex marriages?
- Will the IRS recognize Registered Domestic Partners (RDP) the same as a marriage? In certain states, like CA, an RDP has the same rights as a married person and they file married on a CA tax return.
- Should prior returns be amended prior to filing the current year return?
- Although ruled unconstitutional, will DOMA still be acknowledged as a prior rule? Will same-sex marriages only now be recognized starting this 2013 year for tax purposes?
- Will states that recognize “common-law marriages” have to include same-sex individuals too?
Vincent Mangiapane, EA
Federal Analyst, Taxbrain