The IRS issued a press release today that is significant for same sex spouses. The changes are discussed more fully in Rev. Proc. 2013-17 and generally reflect the holding in the Supreme Court’s decision in U.S. v. Windsor.
Here are some of the major points:
When are individuals of the same sex lawfully married for federal tax purposes?
For federal tax purposes, the IRS looks to state or foreign law to determine whether individuals are married. If same-sex spouses validly entered into in a marriage in a domestic or foreign jurisdiction then that marriage is valid for all federal tax purposes.
This is true even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.
This means that a couple married in Massachusetts, but living in Texas (which does not recognize same sex marriage), are still treated as married for Federal tax purposes.
What about Community Property?
The normal rule is that federal law first looks to state law to determine if there is a property right. Thus if Texas does not permit same-sex marriage then it would follow that that couple would not be subject to community property rules. The IRS has taken the position that Code Section 66 (treatment of community income) applies to same-sex spouses. The reason given is that same-sex spouses are married for all federal tax purposes.
What rules apply to qualified retirement plans?
Qualified retirement plans are required to comply with the following rules pursuant to Rev. Rul. 2013-17.
A qualified retirement plan must treat a same-sex spouse as a spouse for purposes of satisfying the federal tax laws relating to qualified retirement plans.
For purposes of satisfying the federal tax laws relating to qualified retirement plans, a qualified retirement plan must recognize a same-sex marriage that was validly entered into in a jurisdiction whose laws authorize the marriage, even if the married couple lives in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.
A person who is in a registered domestic partnership or civil union is not considered to be a spouse for purposes of applying the federal tax law requirements relating to qualified retirement plans, regardless of whether that person’s partner is of the opposite or same sex.
What are the filing requirements for same sex couples?
After September 16, 2013 same sex spouses must follow the rules that all other married couples have to follow. Generally this means that you must file married filing jointly or married filing separately.
Are refunds available for overpayments in prior years?
Refunds are available for all overpaid taxes paid by taxpayers (even for some employers). If you would have been entitled to a lesser tax bill had you been treated as married, you need to act quickly. You must act before the statute of limitations expires. The look back period is generally 3 years.