A lot of people consider filing of tax return a real complicated matter especially those with complex tax situations. However, with the United States Supreme Court ruling declaring the DOMA or the Defense of Marriage Act of 1996 unconstitutional, legally married same-sex couples will experience great changes.
With the Supreme Court ruling, same-sex couples who are legally married can now use the married filing status. They can either use the ‘married filing jointly’ status or the ‘married filing separately’ status. These changes, according to financial experts, can both become beneficial and disadvantageous in various ways to some same-sex couples.
Some experts believe that same-sex marriages have created a grey area in the law especially involving the federal and state tax systems. Same-sex married couples should now study their options and think of the cost and benefits of these amendments on their tax situations.
States That Do Not Recognize Same-Sex Marriage
Same-sex married couples may still encounter filing status issue if they live in a state that does not recognize same-sex marriage. Although a lot of states already recognize same-sex marriages, there are still a lot of states that do not.
For information purposes, here are some of the states that allow same-sex marriages and also allow these couples to file taxes using the married filing status.
• New York
• New Hampshire
There are also some states that allow same-sex civil unions or registered domestic partners (RDP) to file taxes as married couples such as California, Delaware, New Jersey, Oregon, and the District of Columbia.
The Internal Revenue Service has still a lot of issues to clear involving the filing statuses for same-sex married couples who live in a state where same-sex marriage is not yet legal. The IRS may determine the filing status or the state may be allowed to determine the status of the married couple for tax filing purposes.
Amending Your Tax Return For Possible Tax Refund
It is a common knowledge that the filing status can have a big impact on the taxpayers’ tax returns. Some same-sex couples that are legally married may need to amend their tax returns for the 2 previous years especially if the amended return will result to a tax refund.
Same-sex couples that are legally married since 2011 and have been filing tax returns using the single filing status because of the DOMA may now amend their returns for the years 2011 and 2012. They can change their filing status from single to ‘married filing jointly’ and receive a tax refund if the amendment result to a tax refund.
However, amending the tax return does not automatically imply a tax refund. Changing the filing status and amending your previous tax return may also result to higher tax responsibility depending on the couple’s tax situation.
One situation were tax return amendment may result to a tax refund is if only one partner is employed and filed tax return using the single filing status. If the filing status is changed to ‘married filing jointly’, the total income of the same-sex couples may be lesser and will move the total taxable income to a lower bracket.
Aside from the state laws and the tax refunds, there are other important factors that same-sex married couples must consider when determining the right filing status to use. Some of these essential factors are withholding taxes, deductions, and health insurance benefits and coverage.
Future Tax Planning For Legal Same-Sex Married Couples
Similar sex couples who are legally married and have been filing their tax returns as single should review their previous returns not only for tax amendment purposes but especially for future tax planning.
If you are thinking of amending your 2011 and/or 2012 tax returns, then you should first review the health insurance benefits given to same-sex couples as well as the alimony paid and received by same-sex partners.
For future tax planning, one of the important components same-sex couples should deliberate is the withholding taxes. Same-sex couples may need to adjust their withholding tax and withholding allowances if they want to file as a married couple.
Other key elements to consider when thinking of changing filing status for legally married same-sex couples are spousal health benefits from pre-tax deductions, pension, and capital loss and passive activity loss carryovers.
To understand the best option for same-sex couples, it is highly recommended to consult a tax expert or a tax lawyer to know the right thing to do and to avoid tax violations.