Time is quickly running out for married same-sex taxpayers to file their individual returns as single for 2012! When the IRS announced on August 29th of this year that it will look to the “place of celebration” to determine a couple’s marital status, same-sex married couples living in non-marriage equality states were finally given the right to be treated the same as opposite-sex couples under federal tax laws. Theannouncementmandates all legally married same-sex couples to either file as married filing jointly or married filing separately for the 2013 tax year. However, based on the effective date of the guidance, couples who have not filed their tax returns for 2012 have the ability to file as unmarried if they file their returns before September 16, 2013. This unanticipated opportunity may save legally married same-sex couples a significant amount in federal income taxes, but only if they can file their returns before the window closes!
Couples treated as married for federal tax purposes enjoy many tax benefits, including the netting of capital gains, tax-free employer provided healthcare insurance, and increased allowable HSA ad FSA contribution limits. However, there are some instances where a married couple ends up paying more taxes when filing jointly than they would have to pay if both partners were able to file as unmarried. This situation is known as the marriage penalty and is often caused when both partners earn relatively the same amount of income. Individuals that use the special allowance for rental real estate and couples who both individually have net capital losses may also find themselves in the marriage penalty.
Legally married same-sex couples who are in the marriage penalty and have not filed their 2012 individual income tax returns should consider taking advantage of this fleeting opportunity to file as single for 2012. While determining whether you are in a marriage penalty situation is not a simple calculation, your tax advisor should be able to run a side-by-side analysis to determine whether married filing joint status ultimately ends up helping or hurting you. Additionally, the Tax Policy Center’sMarriage Bonus and Penalty Tax Calculator can help give you an idea of where you may stand.
If you are considering filing as single, keep in mind that September 16th is a Monday and returns that are to be filed as unmarried must be postmarked before this date. Therefore, The Tax Warriors suggest that you mail or electronically transmit your return by Friday September 13th to be safe. Returns may be sent out on Saturday, but remember, most post-offices are closed on Sunday, which means returns mailed that day will not be post-marked until Monday when it is too late!
If you have any questions or need help determining whether you are in a marriage penalty situation please do not hesitate to contact The Tax Warriors via the button below or give us a call at 215-665-3960. The Tax Warriors at Drucker & Scaccetti have significant experience in these areas and a dedicated LGBT teamthat can help you understand the law and apply it to your situation.