Same Sex Marraige

[RLymanC]

Notice from Spidell:

IRS announces they will recognize same-sex marriages (08-29-13)

The U.S. Department of the Treasury and the IRS ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. (Revenue Ruling 2013-17) The ruling specifically states that it applies only to “legally married” same-sex couples, and not to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. However, it does apply regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

[John of PA]

Can they still file as SINGLE if they choose?

The question that comes to mind here is this: Can a same sex couple who can
now file a joint return, still choose to file SINGLE, or must they now file
either joint or married filing separate?

[Lion]

No. For 2013 returns their choices for federal returns are MFJ, MFS, and HOH if they qualify.

For prior years, they MAY but are NOT required to amend their federal returns to a married status.

[Gary2]

To be precise, they have until Sep. 16 to file as single for 2012. See Q2 at http://www.irs.gov/uac/Answers-to-Fr...arried-Couples.

But were you asking about the phase-in or going forward? I'm surprised at the number of questions being asked by tax preparers that amount to finding ways to treat same-sex couples differently, after the Supreme Court said not to. Things like checking marriage licenses, having to ask where they got married, and all sorts of other things. The answer is that for federal income tax purposes, starting for tax year 2013 (and the phase in for 2012), there is no difference between a same-sex and opposite-sex married couple, and no reason (from federal tax law) to treat them any differently.

[appelman]

Perfecting protective claims for refund.

Does anyone know the protocol for submitting a 1040X to perfect a previously filed protective claim for refund for a closed year?

To be precise, they have until Sep. 16 to file as single for 2012. See Q2 at http://www.irs.gov/uac/Answers-to-Fr...arried-Couples.

But were you asking about the phase-in or going forward? I'm surprised at the number of questions being asked by tax preparers that amount to finding ways to treat same-sex couples differently, after the Supreme Court said not to. Things like checking marriage licenses, having to ask where they got married, and all sorts of other things. The answer is that for federal income tax purposes, starting for tax year 2013 (and the phase in for 2012), there is no difference between a same-sex and opposite-sex married couple, and no reason (from federal tax law) to treat them any differently.

[Lion]

For those of us who have same sex couples as clients, this may be an opportunity to add value to the client relationship and also a source for some fees. These two items should be looked at when we are doing the 1040X to change filing status.

Q10. If an employer provided health coverage for an employee’s same-sex spouse and included the value of that coverage in the employee’s gross income, can the employee file an amended Form 1040 reflecting the employee’s status as a married individual to recover federal income tax paid on the value of the health coverage of the employee’s spouse?

A10. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer provided health coverage for an employee’s same-sex spouse, the employee may claim a refund of income taxes paid on the value of coverage that would have been excluded from income had the employee’s spouse been recognized as the employee’s legal spouse for tax purposes. This claim for a refund generally would be made through the filing of an amended Form 1040. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/t...ics/tc308.html.
For a discussion regarding refunds of social security and Medicare taxes, see Q&A #12.

Example. Employer sponsors a group health plan covering eligible employees and their dependents and spouses (including same-sex spouses). Fifty percent of the cost of health coverage elected by employees is paid by Employer. Employee A was married to same-sex Spouse B at all times during 2012. Employee A elected coverage for Spouse B through Employer’s group health plan beginning Jan. 1, 2012. The value of the employer-funded portion of Spouse B’s health coverage was $250 per month.
The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee A included $3,000 ($250 per month x 12 months) of income reflecting the value of employer-funded health coverage provided to Spouse B. Employee A filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2.
Employee A may file an amended Form 1040 for the 2012 taxable year excluding the value of Spouse B’s employer-funded health coverage ($3,000) from gross income.

Q11. If an employer sponsored a cafeteria plan that allowed employees to pay premiums for health coverage on a pre-tax basis, can a participating employee file an amended return to recover income taxes paid on premiums that the employee paid on an after-tax basis for the health coverage of the employee’s same-sex spouse?

A11. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer sponsored a cafeteria plan under which an employee elected to pay for health coverage for the employee on a pre-tax basis, and if the employee purchased coverage on an after-tax basis for the employee’s same-sex spouse under the employer’s health plan, the employee may claim a refund of income taxes paid on the premiums for the coverage of the employee’s spouse. This claim for a refund generally would be made through the filing of an amended Form 1040. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/t...pics/tc308.html. For a discussion regarding refunds of social security and Medicare taxes, see Q&A #12.

Example. Employer sponsors a group health plan as part of a cafeteria plan with a calendar year plan year. The full cost of spousal and dependent coverage is paid by the employees. In the open enrollment period for the 2012 plan year, Employee C elected to purchase self-only health coverage through salary reduction under Employer’s cafeteria plan. On March 1, 2012, Employee C was married to same-sex spouse D. Employee C purchased health coverage for Spouse D through Employer’s group health plan beginning March 1, 2012. The premium paid by Employee C for Spouse D’s health coverage was $500 per month.
The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee C included the $5,000 ($500 per month x 10 months) of premiums paid by Employee C for Spouse D’s health coverage. Employee C filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2.
Employee C’s salary reduction election is treated as including the value of the same-sex spousal coverage purchased for Spouse D. Employee C may file an amended Form 1040 for the 2012 taxable year excluding the premiums paid for Spouse D’s health coverage ($5,000) from gross income.

Q12. In the situations described in FAQ #10 and FAQ #11, may the employer claim a refund for the social security taxes and Medicare taxes paid on the benefits?

A12. Yes. If the period of limitations for filing a claim for refund is open, the employer may claim a refund of, or make an adjustment for, any excess social security taxes and Medicare taxes paid. The requirements for filing a claim for refund or for making an adjustment for an overpayment of the employer and employee portions of social security and Medicare taxes can be found in the Instructions for Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. A special administrative procedure for employers to file claims for refunds or make adjustments for excess social security taxes and Medicare taxes paid on same-sex spouse benefits will be provided in forthcoming guidance to be issued by the IRS in the near future.

[Gary2]

In the IRS FAQ, Q14 gives more insight into the FICA taxes:

Q14. If an employer cannot locate a former employee with a same-sex spouse who received the benefits described in Q&A #10 and Q&A #11, may the employer still claim a refund of the employer portion of the social security and Medicare taxes on the benefits?
A14. Yes, if the employer makes reasonable attempts to locate an employee who received the benefits described in Q&A #10 and Q&A #11 that were treated as wages but the employer is unable to locate the employee, the employer can claim a refund of the employer portion of Social Security and Medicare taxes, but not the employee portion. Also, if an employee is notified and given the opportunity to participate in the claim for refund of Social Security and Medicare taxes but declines in writing, the employer can claim a refund of the employer portion of the taxes, but not the employee portion. Employers can use the special administrative procedure that will be set forth in forthcoming guidance to file these claims.

Though it doesn't explicitly say so, the implication is clear: The refund of FICA taxes on previously imputed income must be requested by the employer, but it's implied that the employee's share must be given to the employee. Until the procedure is published, it's not clear whether the employee's share will be sent directly to the employee or if the employer is responsible for paying it over. Regardless, the employer is not allowed to keep the employee's share.

[John of PA]

Gary2, thank you for that link, it is very helpful; but don't be suprised by all the questions. At the state level there are still going to be confusion as to how to file the state return, with different rules for different states. You make a good point. A tax preparar should not be asking to see a marriage certificate to same sex couples only.