IRS to recognize same sex marriages on September 16, 2013.

This came in today from Karen Brosi at Western CPE.  She has done all the work but I will make some comments, especially as this change pertains to Tennessee tax payers. Karen Brosi All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes   In late August 2013, 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. 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. Tennessee doesn't recognize same sex marriages.  If a same sex couple marries in a state that recognizes same sex marriages, then Tennessee still will not recognize the marriage.  And Tennessee taxes, such as the Hall Tax on investment income, would still have to be filed separately as if the spouses were still single. Rev. Rul. 2013-17 implements federal tax aspects of the June 26th Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act. Under the 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, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. 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. I don't advise rushing off to amend past returns without a great deal of careful analysis.  When a tax return is amended the statute of limitations starts again from the date amended.  This may not mean a problem at all.  I would analyze if the amount of refund resulting from amending the return is worth extending the statute of limitations on the tax return.  Extending the statute of limitations means the return will have a longer time for possible IRS audits.  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. Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return. Future Guidance.  Treasury and the IRS 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 IRS also 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. I don't know that this would cause any need for refunds to Tennessee employers since Tennessee doesn't recognize same sex marriages.  On the other hand, these deductions are for federal business income tax returns, so this might very will apply to Tennessee businesses.  If a business owner in Tennessee wants me to research it, I will.  I will also keep my eyes open for any information that comes from the Tennessee Department of Revenue regarding this issue. I have a feeling they will make a statement and when they do, I'll let you know. Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on September 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).

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