Retroactive tax planning after Windsor.

• Author: LeBlanc, Brian P.

PREVIEW

* Take advantage of a unique opportunity this year to help clients who are same-sex married couples to retroactively file joint returns for open tax years.

* Learn what information to capture and how to analyze the tax results.

A tax return engagement usually does not begin with the question, "Should this couple amend prior-year returns?" But the Supreme Court's holding that Section 3 of the Defense of Marriage Act (DOMA) (1) was unconstitutional triggers just this question for same-sex married couples.

DOMA, which was enacted on Sept. 21, 1996, defined the word "marriage" as a legal union between one man and one woman as husband and wife. DOMA further defined the word "spouse" as a person of the opposite sex who is a husband or a wife. This legislation in effect barred federal recognition of same-sex marriages for all purposes, including Social Security survivors' benefits, insurance benefits, immigration, and income tax filing.

On May 17, 2004, Massachusetts became the first U.S. state to recognize same-sex marriages. (2) Since then, 17 states and the District of Columbia have legalized same-sex marriage, and same-sex partners have married in these states. (3) On June 26, 2013, the U.S. Supreme Court ruled that Section 3 of DOMA was unconstitutional, (4) leading the IRS to announce two months later, in Rev. Rul. 2013-17, that all legal same-sex marriages would be recognized for federal tax purposes.

Rev. Rul. 2013-17 specifically states that same-sex couples who filed their returns before Sept. 16, 2013, may choose to, but are not required to, amend their federal tax returns for prior years. Taxpayers who were in legal same-sex marriages before last year can now decide whether to amend prior-year returns.

This article uses several examples involving a married couple, A and B, to illustrate some of the relevant points. (5) Assume that A and B were legally married for many years in Massachusetts, where same-sex marriage was recognized beginning in 2004. During 2010, 2011, and 2012, the years still open under the statute of limitation for filing amended returns, each of them filed a separate federal income tax return, Form 1040, U.S. Individual Income Tax Return.

B and A married in Massachusetts shortly after same-sex marriage was legalized in 2004. B was born in 1970, and A was born in 1979. B became unemployed in late 2010 and started collecting unemployment for the end of that year and for 2011 and 2012. In 2012, B became...