DOMA Update: Deadline Approaching to Amend Returns for 2010 Tax YearMarch 18, 2014
Bruce A. Desrosiers, CPA, MST
Same-sex couples have some calculating to do this spring as the effects play out from the U.S. Supreme Court decision made last year regarding the federal Defense of Marriage Act.
Among a number of choices same-sex couples must make in the aftermath of that landmark ruling is whether to file amended tax returns for previous years.
For the 2010 tax year, the filing deadline for amended returns is fast approaching. Typically, that deadline will be April 15, 2014, though Rhode Island law is less flexible than federal law in this regard.
The decision about whether to file an amended return is one of the practical implications of the Supreme Court's June 2013 ruling that Section 3 of the Defense of Marriage Act is unconstitutional. The ruling in U.S. v. Windsor, Edith, et al. required the federal government to recognize as married same-sex couples who are legally married under state law.
Rhode Island and the other five New England states are among those that recognize same-sex marriages. If your marriage was licensed in another state or country, and you now reside in Rhode Island, your marriage will be recognized by the federal government in virtually all circumstances.
In the aftermath of the ruling and subsequent notification by the Internal Revenue Service (Revenue Ruling 2013-17), the states have issued guidance on how same-sex couples should approach their income tax filings. The Rhode Island Division of Taxation issued its guidance Sept. 6, 2013.
For tax purposes, marital status is assessed on the last day of the year. Same-sex couples will file federal income tax returns as "married filing jointly" or "married filing separately" for the tax year.
If someone is allowed under federal law to amend his or her federal income tax returns to claim a married filing status, then he or she will be allowed to amend their Rhode Island income tax returns to claim a married filing status. If someone is not allowed under federal law to amend their federal income tax return, then they will not be allowed under Rhode Island law to amend their Rhode Island income tax return to claim a married filing status.
If a same-sex marriage under Rhode Island law occurred on or after Aug. 1, 2013, then the couple generally cannot amend either their federal or their Rhode Island returns for tax years prior to 2013, to claim a married filing status. In almost every case, the filing status on the Rhode Island return must be the same as the filing status on the federal return.
While the Supreme Court ruling brings with it many advantages for same-sex couples amending previous years' tax returns, it is not uniformly positive for each couple.
Some people could actually owe more in taxes than they did with their original filings; others may get a refund. Some couples could pay more in taxes for one year and get a refund for other years.
Couples could end up owing less tax when filing jointly because they can combine incomes, deductions and credits. This will most often be the case when one spouse has a high income and the other earns substantially less—or does not work outside the home.
In instances in which couples have similar taxable incomes that, when combined, exceed the 15% marginal tax rate, they could be penalized financially.
The top income tax bracket for 2013 is 39.6%. Single filers hit the bracket when their adjusted gross income exceeds $400,000. Married couples hit the bracket when AGI is greater than $450,000. High-earning same-sex couples filing joint returns may see their tax liabilities rise as a result of the law changes.
As for the deadlines by when couples must amend returns, generally, the IRS requires that a person apply for a refund within three years after the date the return is filed, or within two years after the date taxes were paid, whichever is later. Laws involving the statutes of limitations are different for federal purposes than for Rhode Island purposes.
The Supreme Court ruling also affects estate and gift taxes, as well as employee benefits. As a result of the Windsor case, the estates of same-sex spouses will be able to use the marital deduction previously available only to opposite-sex couples. The case also will allow same-sex couples to take advantage of "gift splitting," which allows a spouse to increase his or her total annual gift exemption by combining both spouses' exemption amount.
More details on what the ruling means for same-sex couples can be found in this earlier BlumShapiro article: http://blumshapiro.com/kbarticle/irs-releases-first-wave-of-guidance-for-married-same-sex-couples
If you have additional questions, please contact Bruce Derosiers at email@example.com 401.330.2743.
Disclaimer: Under U.S. Treasury Department guidelines, we hereby inform you that (1) any tax advice contained in this communication is not intended or written to be used, and cannot be used by you, for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service (or state and local or other tax authorities), and (2) no part of any tax advice contained in this communication is intended to be used, and cannot be used, by any party to promote, market or recommend any transaction or tax-related matter(s) addressed herein without the express and written consent of Blum, Shapiro & Company, P.C.