While uncertainty still lingers in some areas of federal law regarding how the recent overturning of DOMA will affect same-sex couples’ abilities to obtain federal benefits, on August 29, 2013, the IRS clarified this ambiguity with regard to federal tax law. The IRS published Revenue Ruling 2013-17 and a news release, IR-2013-72, announcing that it will recognize “all legal same-sex marriages … for federal tax purposes.” This means that all same-sex couples legally married in any state are married, so far as the IRS is concerned, no matter where they now live.
The IRS ruling marks the first big first step toward a general federal recognition of same-sex marriages. The IRS could have decided that married same-sex couples file their taxes on a “place of residence” basis, that is, if their state recognizes same-sex marriage, they can file as a married couple; if not, they must file individual returns. Instead, the IRS opted for a “place of celebration” rule, which means that once a couple is married in one of the 13 states that recognize same-sex marriage (14, including Washington D.C.), the IRS considers them married for all purposes going forward, even if they move to a state where same-sex marriage is not recognized.
In doing so, the IRS concluded that gender-specific terms in the tax code such as “husband” and “wife” must be construed in a gender-neutral way. The IRS also concluded, however, that other types of formal relationships, such as civil unions and registered domestic partnerships, are not equivalent to marriage, and persons in such relationships are not married for federal tax purposes.
The IRS ruling takes effect on September 16, 2013, though taxpayers may rely upon the ruling retroactively. Taxpayers may amend their previously filed tax returns back to 2010 to change their filing status and recalculate their federal income tax. Employers too are permitted to rely upon the ruling retroactively claim a refund of, or make an adjustment for, any excess Social Security and Medicare taxes paid. The IRS will issue a special administrative procedure for employers on this point in the future. Employers, however, cannot make claims for refunds of overwithheld income tax for prior years, but may make adjustments for income tax withholdings that were overwithheld in the current year, provided the employer has repaid and reimbursed the employee for the overwithheld income tax before the end of the calendar year.