Last year’s hard-fought victory at the Supreme Court has brought an overwhelming sense of joy and dignity to same-sex couples across the nation, but navigating through the American tax system as a newly married couple has also been rife with confusion and questions. I’m here to answer a few of the most pressing questions I’ve received from same-sex couples now that tax season is upon us.
Can same-sex spouses file federal tax returns using a “married filing jointly” or “married filing separately” status?
Yes. Thanks to the Supreme Court ruling on June 26, 2015, in the Obergefell decision, if a same-sex couple is legally married, whether they were married in the United States or another country, the IRS and all states will recognize them as married for tax purposes. This means they will follow the same set of tax laws for heterosexual married couples. Your filing status on the last day of the calendar year will determine your filing status. If you were married or divorced as of Dec. 31, 2015, you can file as married filing jointly (MFJ) or married filing separately (MFS) if you are married on Dec. 31. If you are divorced, you will be single or head of household if you qualify for those filing statuses. The last day of the year determines how you file for the entire year, even if you got married or divorced on the very last day of the calendar year.
If you get married during the year, you can file as married filing jointly (MFJ) or married filing separately (MFS). When you file a joint return with your spouse, you are jointly and severally liable for whatever is on the return. This means whether or not liabilities are attributed to you, if you file a joint return, you become fully responsible for liabilities on the return. If you have any concerns or do not want to take on the liabilities of your spouse, you would need to file as married filing separately.
Additionally, you would file your state returns as MFS or MFJ.
What are the benefits of filing either way?
Believe it or not, there are actually marriage penalties built into the tax code. Typically if one spouse has lower or no income and the other spouse has income, it is advantageous to file a joint return at both the federal and state levels. However, if both taxpayers are in higher tax brackets, it could create more tax due to file a joint return. The “marriage penalty” kicks in once two single people each make more than $37,450 for 2015 and $37,650 for 2016.
If same-sex spouses (who file using the married filing separately status) have a child, which parent may claim the child as a dependent?
Normally, this should be the parent with the highest annual gross income (AGI) and because this can get a little complicated, you may need to really evaluate if MFS is worth the loss of many of the tax benefits.
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?
They would not amend their returns. Rather, under Rev. Rule 2013-17 the employer has a way to remedy this for the taxpayer so the individual should consult their HR department to get this resolved. My understanding of this is that only the FICA/Medicare withheld will be refunded to the employee from the employer, as the federal and state taxes withheld will be reconciled when they file their personal income tax returns. The employer will only refund the employee’s portion of the FICA/Medicare taxes if the tax returns for which they are claiming a refund are filed as married filing jointly or married filing separately. If the taxpayer filed their returns as single or head of household and have not amended their returns to married filing jointly or married filing separately, they will need to amend their returns before requesting the refund from their employer.
In many cases, this may not be advantageous and could cost the taxpayer more in tax than the refund they requested.
Lynn Pasqualetti is licensed with the National Association of State Boards of Accountancy (NASBA), the US Treasury and many states as a Continuing Professional Education (CPE) provider for certified public accountants (CPAs), enrolled agents (EAs) and tax attorneys where she has taught classes to other professionals in her industry since 1992. Lynn specializes in taxation, consulting and business development.
Editor’s Note: This is general tax information and should not be relied upon to prepare your returns as each situation is unique and may have other variables. Please consult a CPA or EA who specializes in federal and state tax matters.