First the Supreme Court overturned DOMA. Now the IRS has announced that no matter what state you live in, if you are married and gay, you should file as married filing jointly on your federal income tax return. Now the big question for everyone is: Should you amend your old tax returns?
The answer, in my best professional opinion, is MAYBE. If you read my blog posts very often, you saw that one coming didn’t you?
For some couples, filing jointly is going to help them out and get them a refund. If you’re a couple that’s entitled to a refund—AMEND! For some couples, filing jointly is going to have them paying more in taxes. To those couples I say—DON’T AMEND. You really do have a choice here because you filed your original return using the law of the land at the time of the filing. You are not required to amend your return because DOMA was overturned. You are allowed to amend your return. There’s a big difference.
An accountant friend of mine in Iowa has been working with some of his gay married clients and he’s finding that about 75% of his clients would lose money or stay close to the same amending their returns. Only about 25% of them would profit from it.
So how do you tell which category you fit into? Generally, a couple with a big difference is incomes—for example, one spouse stays home to care for the household while the other is the primary breadwinner—that couple is more likely to benefit from filing jointly. On the other hand, a couple where both spouses work and their incomes are close together could find themselves kicked into a higher tax bracket. They could really lose out filing together. Tax returns for families with children can go either way. I’m an accountant geek, so I say just run the numbers.
It makes a lot of sense to run the numbers because the new tax ruling is going to affect all of your future tax returns as well. If filing jointly is not to your advantage, it’s better to learn that now so you can adjust your withholding. Here’s a link to my Tax Tips for Newlyweds: http://robergtaxsolutions.com/?s=tax+tips+for+newlyweds. You may have been married for a couple of years, but never gotten to file a federal return as being married before so you might not have needed these tips before.
One more thing—if you’re in a state that doesn’t recognize gay marriage, you still might not be able to file a joint state return. Couples in gay marriage states have been dealing with the opposite problem for a few years now. They file joint state returns but then file a separate federal return. I suspect we’ll be seeing a lot of separate state returns for awhile. It’s going to take some time for lawmakers to make up their minds on that.
So, do you wait to see how your state legislature is going to handle the issue before amending? I say no. Go ahead and file your federal amendments. If the state changes, you can fix those later. I worry about people waiting too long and then missing out on their refund because they didn’t file the amended return on time. Unless the IRS grants some type of special extension, you only have until April 15th of 2015 to amend your 2010 income tax return.
If you need help determining if you should file an amended return or not, please contact our office. We can help you figure out if it’s worth your while or not.