Married Same-Sex Couples Can Amend Past Federal Tax Returns to "Married Filing Jointly" -- But That May Not Be a Smart Move for Some

NEW YORK, NY--(Marketwired - Nov 19, 2013) - Thanks to the Supreme Court's 2013 decision striking down the Defense of Marriage Act, married same-sex couples will be required to file their 2013 federal returns under one of the "married" categories -- either as "married filing jointly" or "married filing separately." 

The IRS will also allow married same-sex couples to amend their past federal returns to "married filing jointly" for prior years in which they were in a marriage recognized by a state or foreign jurisdiction. The statute of limitations allows them to amend federal returns for 2010, 2011 and 2012 (providing that the 2012 return was filed before September 16, 2013).

Amending Past Tax Returns to "Married Filing Jointly" Might Not Be a Smart Move

But there's a catch: For some couples, changing to "married filing jointly" would be a mistake. "Being able to file a joint return will benefit many same-sex married couples -- but not all of them," says Edwin B. Morris, partner in the Tax Group at Marks Paneth. He and his colleagues at Marks Paneth offer these tips:

• When it might not make sense for married same-sex couples to amend their returns: "If spouses have roughly equal income, it may not help to amend past returns, since the tax benefit, if any, will not be significant," Mr. Morris says. "In fact, those couples might fall prey to the so-called 'marriage penalty,' where married couples pay a higher marginal tax rate than would two single people who had the same income."
  
  "Also, in the case of a couple with children, where in the past one spouse adopted the other's children, the law allows for generous adoption credits. But those aren't available in a joint return," Mr. Morris says.
  
  
• When it does make sense for married same-sex couples to go back and re-file as "married filing jointly": "If income is unequal -- say, for example, that one spouse earned the majority of the income, or one spouse had high income and the other had setbacks or business losses -- then it could be advantageous to amend the past returns and file jointly," Mr. Morris explains. "In that situation, the tax bill on the combined income will probably be lower.
  
  "Also, married couples that amend their returns can recapture the tax they paid on health benefits if a spouse was covered on an employer plan. Those spousal benefits may have been taxable when the couple filed as single individuals, but won't be taxable when they change to 'married filing jointly.' So by amending their returns, they can get those taxes paid back to them."
  
  

More General Guidance for Newly Married Same-Sex Couples and Any Newly Married Couple: Give Yourself a Tax and Financial Check-Up

"Marriage opens up a whole new world for same-sex couples," says Marks Paneth Tax Group partner Laura LaForgia. "But like any married couple, they'll have new tax and financial planning issues to manage.

"Too often, people who get married forget to review and update critical information -- in particular withholding, beneficiary selection and insurance coverage -- which can lead to serious problems down the road," Ms. LaForgia says.

She says newly married same-sex couples -- and all newly married couples -- should:

• Review paystubs to determine if withholding, dependents or other deductions need to be adjusted for the upcoming year. "Make sure your withholding level is correct for your combined income and you're not being under- or over-withheld," Ms. LaForgia says. 
  
  
• Review beneficiaries on employer plans and financial accounts, and review wills. This is particularly important if you have married or divorced during the year. "People go through major life changes and forget to update their beneficiaries. Having the wrong beneficiary on a will, retirement account or insurance policy can make it much harder (and in some cases impossible) for your preferred beneficiary -- for example, your spouse -- to collect benefits. In addition, it could result in adverse tax consequences and lengthy litigation."
  
  
• Review insurance coverage. "A big lifestyle change like marriage might require you to carry more or different insurance. Couples who have children or who adopt children will probably want to increase their coverage." 
  
  
• Contact the Social Security Administration if you've gotten married during the year and you or your spouse collects Social Security. "It's important for retired couples to make sure they are both collecting the maximum possible amount. A spouse can collect Social Security based on his or her work record, or a percentage of the spouse's work record, whichever is higher. So if the spouse's benefit is higher, you want to make sure that you're receiving it. If you think you might be eligible for benefits but are not sure, you are encouraged to apply to preserve your filing date."
  
  

"Any big change in life status -- such as getting married -- is an opportunity to do a tax and financial check-up and make sure everything is up to date," Ms. LaForgia says. 

To speak with Laura LaForgia or Edwin Morris, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at (212) 255-8386 or Katarina@sommerfield.com.

About Marks Paneth

Marks Paneth LLP is an accounting firm with over 500 people, of whom nearly 65 are partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services, and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth, whose origins date back to 1907, is the 34th largest accounting firm in the nation and the 16th largest in the New York area. In addition, readers of the New York Law Journal rank Marks Paneth as one of the area's top forensic accounting firms for the fourth year in a row.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit www.markspaneth.com.