In the wake of the U.S. Supreme Court DOMA ruling in US v Windsor, many questions were raised about the effect on specific Federal laws and programs. The ruling opens the door to spousal status and benefits under Social Security, the Veterans Administration, federal pensions, the INS and the IRS.
The Internal Revenue Service issued Revenue Ruling 2013-17, which is effective as of September 16, 2013, and provides guidance on the effect of the Windsor ruling for Federal tax purposes. The bottom line is that same-sex couples legally married in jurisdictions that recognize their marriage will be treated as married for Federal tax purposes. This is the case regardless of whether the laws of the state in which the couple reside recognize their marriage. By way of example, a same-sex couple who married in Massachusetts but resides in Ohio will be treated as married for Federal tax purposes, despite the fact that Ohio currently does not recognize the marriage for state purposes.
With regard to Federal income taxes, same-sex spouses may (but are not required to) amend their previously-filed federal income tax returns for “open years” – typically the prior three years – to file jointly if doing so would be more advantageous. (Note: couples who would end up paying more taxes as a result of filing jointly are not required to amend.)
The coverage of same-sex spouses under employee benefits will no longer be treated as imputed income to the employee spouse. Anyone who has been covering a same-sex spouse should contact his/her employer to determine whether any Federal tax withholdings have been made in 2013 and arrange for the appropriate adjustments.
Qualified Retirement Plans, including those governed by the Employee Retirement Income Security Act of 1974 (ERISA) such as 401(k) plans, will likewise treat same-sex couples as legally married for all purposes provided their marriage is legal in the jurisdiction (U.S. or foreign) in which they were married. This includes the right of spouses to be named as the primary beneficiary absent their consent to an alternative beneficiary. Further IRS guidance is forthcoming on the applicability of the DOMA decision to qualified plans prior to September 16.
EPLO will continue to monitor developments on the tax and other aspects of the DOMA ruling.