New Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled in IRS Revenue Ruling 2013-17 that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. Importantly, the ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage, answering a question that previously was not clear.

The ruling implements federal tax aspects of the June 26, 2013, U.S. Supreme Court decision in United States v. Windsor, which decision invalidated a key provision of the 1996 federal Defense of Marriage Act (DOMA). Under the new IRS ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, just as important, the ruling does NOT apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law. Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status. 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.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

How to File a Claim for Refund

Taxpayers who wish to file a refund claim for prior income taxes should use IRS Form 1040X, Amended U.S. Individual Income Tax Return.  Taxpayers who wish to file a refund claim for gift or estate taxes should file IRS Form 843, Claim for Refund and Request for Abatement. For information on filing an amended return, see IRS Tax Topic 308, Amended Returns, available on www.IRS.gov, or the Instructions to IRS Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.

Future Guidance

In the new ruling, the Treasury Department and the IRS announced that they 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 the IRS also announced that they 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. Other agencies also may provide guidance on other federal programs that they administer that are affected by the Internal Revenue Code.

The Treasury Department and the IRS will begin applying the terms of Revenue Ruling 2013-17 on Sept. 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired.

For further information about the ruling and its impact, contact your professional tax advisor or tax preparer, or call Hertsel Shadian, Attorney at Law, LLC at (503) 597-8701. Additionally, individuals can refer to Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, available on the IRS website at www.IRS.gov. See also, Publication 555, Community Property. Please also feel free to share this article with others that might benefit from this information.