Defense of Marriage Act (DOMA) changes tax rules

IRS Guidelines For 2013

When the US Supreme Court struck down parts of the Defense of Marriage Act, commonly known as DOMA, significant changes occurred in the federal filing status for some people in this country.  There is a major difference in tax calculations between filing as Single and filing as Married Filing Jointly (MFJ). Same-sex couples who are legally married can now change their filing status to reflect their marital status. The federal tax return now agrees with the way some states like California reported Registered Domestic Partners (RDPs). If a married couple lives in California, they can now list themselves on both the federal and state tax returns as married.   It is not clear, however, whether the California RDP designation is considered the same as a married couple on a federal tax return.  Ambiguities especially reconciling state and federal definitions remain even before the IRS releases guidance that will hopefully clarify tax issues relating to the prior year tax filings.

Despite the often cited “marriage penalties” especially when both partners have earned income, the MFJ filing status offers tax advantages. In general terms, the standard deduction for a married couple is double that of a single person. The IRS has not officially stated how the recent DOMA decision will affect federal income tax filings retroactively.  Couples who were legally married in a prior year should nevertheless consider amending prior year federal returns for possible refunds still available under the statute of limitations. In the case of California, the IRS allowed amended federal tax returns for prior years in order to determine community property issues pertaining to RDPs ruled by the state.

Calculate tax brackets and various floors and thresholds when to determine the lowest possible tax calculations.

There are parts of the DOMA decision that extend far beyond a fundamental determination of filing status. Recognition of marriage for all couples affects retirement plan payments, estates, and gift tax, as well as social security benefits. Many new possible tax strategies are available now that both opposite- and same-sex couples share the same filing status and potentially change how contributions and distributions can be handled.  Given the way the IRS managed changes in community property matters reported retroactively in, for example, California, guidance and clarification of tax treatment from the IRS is highly anticipated.

It is probably safe to make simple extensions of the Internal Revenue Code to new areas of tax reporting.  For example, the IRA surviving spouse beneficiary of a same-sex married couple has the same tax benefits as any other spouse; they can treat their deceased partner’s IRA as their own and postpone payouts up until required minimum distributions are due.  Similarly, when one spouse transfers assets to another or is left assets by their deceased spouse, property is not subject to taxation.  In addition, the portability election now applies between any married couple where, as of 2013, up to $10,500,000 USD in assets is excluded from estate or gift tax.

Determination and allocation of Social Security benefits are also affected by the DOMA decision.  Some benefits are determined by the earnings history of a spouse. It is not clear how the DOMA decision will be applied retroactively to qualified benefits for a divorced spouse. Many unaddressed issues remain especially in reconciling state rulings with federal statutes as well as between government agencies like the Internal Revenue Service and the Social Security Administration.  Following these recent changes in the DOMA, implementation of health care rules as stated(?) in the ‘evolving’ Affordable Care Act require greater clarity especially since tax preparers take decisive interpretive actions whenever they prepare an individual or couple’s personal income tax return. If the guidance is ambiguous or absent, how can they provide a timely and accurate service to their clients?

Other recent references to DOMA and about RDPs as of 28 July 2013:

Military Ready to Act in Response to DOMA Ruling – Hit & Run …
The Defense of Marriage Act prohibited the federal government from recognizing and extending benefits to same sex spouses. With the Supreme Court striking.

Life After DOMA: Same-Sex Marriage Fight Heads Back to the States …
One month after the Supreme Court struck down a crucial provision of the Defense of Marriage Act, gay Americans and the government alike are still sorting through the ramifications of the ruling — just…

Staver: SCOTUS DOMA Ruling Is Like Trying To Suspend The Law …
On today’s “Faith and Freedom Radio” broadcast, Mat Staver continued to directly compare the Supreme Court’s recent ruling on the Defense of Marriage Act to the Dred Scott ruling and other egregious court decisions from 

Tax Tips for Registered Domestic Partners and Same-Sex Couples …
As of 2012, the IRS follows DOMA – the Defense of Marriage Act – which only recognizes marriage between a man and woman. Domestic partners, therefore, can submit only individual 1040s; they cannot file jointly. How you handle 1040 forms 

Marital Deduction for Registered Domestic Partners after Windsor
California registered domestic partnerships may soon be converted into marriages for same-sex partners after a relatively short opt-out period as occurred in Washington state, where same-sex marriages not dissolved by 



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Phillip Schein, EA

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Phillip Schein, EA

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