Tag: DOMA

Posted on by Jan Roberg

Married and Gay: Should You Amend Your Tax Returns?

Photo by Guillaume Paumier at Flickr.com

 

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.

Posted on by Jan Roberg

DOMA Overturned—Now What Do I Do?

Gay Pride Flag

Photo by Kellie Parker at Flickr.com

 

Wednesday, June 26, 2013 the United States Supreme Court overturned the Defense of Marriage Act (DOMA).  Effective immediately,  married gay  couples will  be able to file their federal income tax returns using the married filing jointly tax status.  What does this mean for you?

 

The first thing to look at is:  Does it make sense to amend my back tax returns?  You’ll want to review your old returns as far back as 2010 to see if the married filing joint tax status would give you any tax benefit.  If so, you will need to amend those tax returns.

 

For tax years prior to 2010, you would have had to file a protective claim to file jointly, see:  http://robergtaxsolutions.com/2012/06/doma-unconstitutional-protecting-your-tax-rights/ Without a protective claim, you cannot file an amended return for years prior to 2010.

 

On your amended return (form 1040X) you will check the box that says Married Filing Jointly in the section that says “Amended return filing status.”  In the explanation box in Part III you will write:

 

pursuant to US v Windsor, this return is being amended to claim Married Filing Jointly tax status.

 

US v Windsor is the court case that the Supreme Court heard when they ruled that DOMA was unconstitutional.

 

You’ll complete the rest of the amended return just as you would any other 1040X form.

 

You are not required to amend your back tax returns if it does not help you.  Because those returns were filed using the law that was in place at the time, you are under no obligation to change your return if it would require you to pay more taxes.

 

Looking ahead:  now that federal law recognizes gay marriage, you may need to do some tax planning given your new status.  For many couples, the married filing jointly status is not beneficial.  I recommend sitting down with a professional and doing some planning, just that same as any other newly married couple would.  Remember, now that the federal government recognizes gay marriage, you are required to claim that you are married on your federal tax return.  You will either need to claim the Married Filing Jointly or Married Filing Separately tax status when you file your 2013 federal tax return.

 

Issues that have yet to be resolved: We know that if you are married in a state that recognizes gay marriage, you may file a federal joint income tax return.  What we don’t know yet is what happens to a couple that is legally married in a gay marriage state but moves to a state that doesn’t recognize gay marriage.  (For example:  a couple gets married in Illinois then moves to Missouri.)   I suspect we’ll see some court cases over that in the future.   I’ll post updates as I learn more.

 

If you’d like to read the court case, here’s a link:  http://www.supremecourt.gov/opinions/12pdf/12-307_g2bh.pdf

Posted on by Jan Roberg

DOMA Unconstitutional? Protecting Your Tax Rights

Gay pride 225 - Marche des fiertés Toulouse 2011.jpg

Photo by Guillaume Paumier on Flickr.com

The First Circuit Court of Appeals ruled that the Defense of Marriage Act (known as DOMA) is unconstitutional.  This issue certainly isn’t settled and is going to go to the Supreme Court.  The Supreme Court may or may not agree, but one thing I know is that it’s going to take some time.  That’s why, if DOMA affects your taxes, you might need to act now.

 

If you are a gay married couple, you haven’t been allowed to file a joint federal tax return because of DOMA.  If DOMA is overturned—then you can.  And, if DOMA is overturned—you can go back and amend old tax returns as far as three years.  You can amend a tax return from 2009 up until April 15, 2013.  After that, any refund you might qualify for is lost.

 

Here’s the catch—the Supreme Court might not hear the case for at least another year so you’d lose out on some of your refund money just because of timing.  But there’s a way to protect your interests now so that if the Supreme Court rules your way, you won’t lose out because of the timeline.

 

Sorry, but I’m going to get really tax geeky here.  If this applies to you, you might want a tax professional’s help.  Bottom line—if you would have benefitted tax wise from filing your return as “married filing jointly” then stick with me, it’s important.

 

You want to file amended tax returns for the tax years you were married with a “protective claim for refund”.  Basically, a protective claim for refund means that your right to the refund is contingent on future events.  In this case, you won’t have the right to claim your tax refund until the Supreme Court issues a decision on DOMA.  For your 2009 tax return, your right to claim that refund could expire before the Supreme Court makes its decision.

 

Basically, a protective claim is going to preserve your right to claim your refund even if the tax deadline has expired.  So if the Supreme Court makes its ruling after April 15, 2013–if you’ve filed a protective claim then you still have a right to your refund even though the statute of limitations for that refund has expired.

 

When you file your 1040x, you’re going to want to say in the explanation box that you are filing a “Protective claim for refund, contingent upon the US Supreme Court decision on the First Circuit Court of Appeals case regarding the Defense of Marriage Act, Gill v OPM.”

 

Generally, the IRS won’t do anything on your protective claim until the contingency is resolved—in this case, when the Supreme Court actually makes its ruling.

 

You will mail your 1040X with the protective claim for refund to the same address that you mail a normal 1040X.  It varies depending upon the state you live in, but it will be in the form instructions.

 

Definitely use certified mail, return receipt requested when you send your amendment in.  That’s your back up that you filed.

 

There aren’t that many people who will qualify to file these protective claims for refund returns.  I’m in Missouri, we don’t recognize gay marriage.  Illinois, next door just recognized it last year so there wouldn’t be any 2009 tax returns for gay couples.  And for some couples, filing jointly doesn’t really reduce their tax burden anyway so it won’t make a difference.  But if this could help you, then you need to know about it.

 

If you’d like to read the full case Gill v OPM, here’s a link: http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=10-2204P.01A

 

One of the points it specifically references is federal income tax returns.