IRS Guidance in regards to DOMA Ruling
On June 26, 2013 the U.S. Supreme Court struck down Section 3 of the Federal Defense of Marriage Act (DOMA) as unconstitutional.
AG LLP’s crossborder tax specialists wrote a summary of the potential implications of such a ruling back in July (click here for article). The U.S. Treasury Department and the Internal Revenue Service (IRS) recently issued guidance that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for Federal tax purposes, irrespective of whether the couple live in a jurisdiction that recognizes same-sex marriage or not. As per the IRS Newswire, “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…However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.”
What was DOMA?
DOMA was a U.S Federal law that allowed states and Federal government to refuse to recognize same-sex marriages which were granted ‘marital’ status under the laws of certain states which legally recognized the marriage of same-sex couples. Due to this law, same-sex couples had to file jointly in those states that recognized gay marriages while having to file individual Federal tax returns because the U.S. Government treated them as ‘single’.
It also affected employee benefits, estates and transfers of assets between spouses, since as per Section 3 of DOMA: same-sex marriages were not recognized for Federal purposes; including group insurance and health benefits, social security survivors’ benefits, immigration, bankruptcy, and the filing of joint tax returns. It also excluded same-sex spouses from the scope of laws protecting families of Federal officers, laws evaluating financial aid eligibility, and Federal ethics laws applicable to opposite-sex spouses.
However with the recent guidance by the US Treasury and IRS, legally-married same-sex couples must now file their Federal income tax return using either the ‘married filing jointly’ or ‘married filing separately’ filing statuses.
They may file original or amended returns choosing to be treated as married for Federal tax purposes for one or more prior tax years which are still open under the statute of limitations.
Refund claims can also be filed for three years (2010, 2011 and 2012) as per the statute of limitations or two years from the date the tax was paid, whichever is later.
This decision also opens the door for US citizens or lawful permanent residents in a same-sex marriage to foreign nationals to file petitions for family-based immigrant visas.
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