Love Wins! What Next?

What Next

Advertisements

Post-Windsor Refunds of Taxes on Spousal Health Insurance

Married same-sex couples need to act now to correct their marital status with employers (only marriage counts, not domestic partnership) and start the process of obtaining refunds for past years’ overpaid taxes.

*If* you are married, and *if* you or your spouse have been receiving “domestic partner” health insurance benefits through an employer, you have paid tax on those benefits. DOMA did not permit the pre-tax treatment allowed heterosexual married couples.  IRS has now released the procedure for claiming those refunds. 

Perhaps unfortunately, the ball is in your employers’ courts.  Refer your HR or Payroll to IRS Notice 2013-61.  Many of them may resist filing the amended returns for prior years; it’s your money, push harder!  In any event, you need to make them aware of your marital status and ensure that 2013 is correct before year-end.

Here’s an industry summary if you want more technical info:  http://www.journalofaccountancy.com/News/20138794.htm

If you are married, contact me to discuss your situation.  You will be required to file a Married return for 2013.  While some of you will receive larger refunds (and will want to amend back years), some of you will be paying more tax!

Feel free to pass this info on to your married friends.  Their financial lives may be getting more complicated.  Suggest they call me to talk!  I’m easy to reach.

 

Are You Married?

Today the IRS released the ruling on “Same-Sex Marriage,” or as we like to call it around here, “Marriage.”   LGBT families & financial professionals have been waiting for months to see what IRS will do with the Supreme Court’s June decision in Windsor v. U.S., the so-called DOMA decision.

They said “…same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.”   Unlike the Social Security Administration, which is so far holding to its Domicile rule, this would include both marriages where you formerly lived, and vacation marriages in the U.S., Canada, or elsewhere.   However, it does not include civil unions, registered domestic partnerships or similar state-recognized relationships.  (More information here:  tinyurl.com/IRS-Marriage)

So, if you are legally married, let me be the first to congratulate you on IRS’ (belated) recognition!  And you need to contact your tax & financial advisors immediately to discuss the implications.   You will be required to file a 2013 federal income tax return as “Married” – either jointly or separately.  Some of you will save taxes.  Many of you will pay more, and you need to correct your withholding now to avoid an unpleasant April surprise.

Also, you will have the opportunity to amend returns back to 2010 (or perhaps 2009 if you contact me immediately), if the change to married status will result in a refund.

Of course, barring some unlikely event in the next few months, your marital status in Ohio, Kentucky, or Indiana will not change, so planning is multi-tiered.

This is a huge planning opportunity – for good or ill!  Feel free to share this message with your friends, who may need professional preparation & planning advice now more than ever.

As always, contact me at 1TaxFinancial anytime via email or phone with your tax & financial questions and concerns.

 

How ’bout that Edie Windsor?!

So what does the end of DOMA mean to your tax & financial circumstances?

 If you’re gay & married and live in a state where your marriage is recognized, you will now be married under federal law too.  The rights & responsibilities of marriage will be yours, including:

  • potential income tax benefits (&/or a marriage penalty)
  • estate planning benefits, including inheritance rights
  • government benefits, including receiving Social Security, Medicare, and disability benefits for your spouse
  • employment benefits, such as obtaining health insurance through your spouse’s employer (without additional tax) and the right to take medical leave to care for a spouse who becomes ill
  • decision-making benefits, including the right to make medical decisions if your spouse is incapacitated
  • sharing income and property acquired during the marriage
  • liability for family expenses and financial support, including support of any children of the marriage, and in the case of divorce, equitable property division & potential financial responsibility for your spouse
  • consumer benefits, such as family rates for health, homeowners’, auto, and other types of insurance.

There are 1,138 federal “benefits” allowed to married couples at last count.  Some are potentially very significant to your tax and financial planning – like how to file your income tax return, and how to structure Social Security claims to maximize benefits.

 I believe that, in the long-term, gay marriage will be legal everywhere.  “The arc of the moral universe is long, but it bends toward justice.”– Parker/MLK.  Or if you prefer numbers to theology, the statistician & blogger Nate Silver of fivethirtyeight.com projects majority public support of gay marriage in 44 states by 2020.

But between now & then, there will be much confusion and litigation.  If you are living in a state which does not recognize your marriage, either because you married out-of-state, or you moved since getting married, your relationship is now evolving with state law and federal rulemaking.  Section 2 of DOMA, which permits states not to recognize gay marriages from other states, was not overturned.  Federal agency rules vary as to whether state of marriage or resident state controls.

If you are in a long-term relationship and not married, you should still be aware of the changing environment so that you can make wise tax and planning decisions.

In either event until you have marital protection, you should consult with an attorney who specializes in LGBT estate planning.  You need to ensure that you and your partner – and your relationship – are legally protected, including powers of attorney, wills, living wills, correct ownership vesting of assets and debts, and coparenting agreements for any children.

At 1TaxFinancial, we’re knowledgeable and do tax prep and planning in this environment, and pledge to maintain currency as the law evolves – to save you time, expense and grief later.  You’ll have a personal relationship with your tax professional, and you’ll get year-round access!  Professional preparation also typically costs less than you fear – and will save you that much in tax &/or trauma!  A typical return might run $200; more with a small business, complex investments or rental property – and be sure to ask about our 50% Partner Discount!