Since the key provision of DOMA was invalidated, what we’re seeing consistently from the IRS is that same sex marriages will be recognized at the federal level no matter where you live. There are a plethora of federal benefits along with taxpayer filing status choices to which same sex married couples, and divorcees of same sex marriages, will now face. Because some of these choices may have a potential additional cost, like amending prior year’s tax returns from single to married filing jointly or separately, it is important to consult with a tax professional who can explain the choices and the cost or benefit of each.
Benefits Given to Same Sex Couples
While same sex married couples and same sex divorcees will now be able to get benefits under federal programs, there will be some couples that experience a reduction in benefits they might already be receiving, such as social security benefits. A previously unrecognized marriage for social security benefits, now recognized will result in reduced combined social security benefits. The unanswered question regarding the social security benefits is whether the Social Security Administration will retroactively apply the marriage penalty and seek reimbursement from the date of marriage for those who have already begun collecting social security.
Department of Labor’s Decision on ERISA
In a technical release issued on September 19, the Department of Labor announced new guidance interpreting the Supreme Court’s decision in United States v. Windsor and its impact on ERISA. The DOL ruled that the terms “spouse” and “marriage” apply to same-sex couples, even if the state in which they live or work doesn’t recognize those unions. This ruling covers private-sector employee benefit plans including pensions, 401(k)’s, health and life insurance and disability plans.
Depending on each couple’s circumstances, there is an assortment of Social Security benefits for which individuals and couples may be eligible ranging from survivor benefits, benefits for minors of a retired parent, and a divorced person’s benefits based on their former spouses’ earnings. The best resource to obtain a list of benefits and qualification requirements is the Social Security Administration website, www.ssa.gov/ . The website is updated regularly with new information. I found the publications and news releases on the site to be user-friendly and include links to download forms or obtain additional information.
How DOMA Impacts You?
Each couple’s situation is unique and therefore it isn’t possible to give boilerplate advice here. The biggest tax decisions for this year will be whether to amend prior years’ federal returns. Because of increased income tax rates and the additional Medicare taxes beginning in 2013, couples will want to be informed about how their taxes are impacted by filing jointly or separately on a going forward basis. There is a built-in marriage penalty on the single vs. married tax bracketing and exclusion amounts for the new add-on taxes.
One should not forget how the Windsor case started, with inheritance and estate taxes. I recommend that married same-sex-couples re-evaluate their estate planning documents or consult with their estate planner/attorney to be sure that their documents and directives match the changes in the law.