Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
The ruling implements federal tax aspects of the June 26th Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.
“Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that
all Americans deserve,” said Secretary Jacob J. Lew. “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
Under the ruling, same sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including
filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.
Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed
for tax years 2010, 2011, and 2012. Some taxpayers may have special circumstances (such as signing an agreement with the IRS to keep the statute of limitations open) that permit them to file refund claims for tax years 2009 and earlier.
Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.
How to File a Claim for Refund
Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.
Taxpayers who wish to file a refund claim for gift or estate taxes should file Form 843, Claim for Refund and Request for Abatement.
For information on filing an amended return, go to Tax Topic 308, Amended Returns at http://www.irs.gov/taxtopics/tc308.html or the Instructions to Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.
Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex
spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.
New York Governor Andrew M. Cuomo announced a new initiative Monday to encourage individuals who owe significant back taxes to the state to pay their bills by suspending their New York State driver licenses when their past-due tax liability exceeds $10,000.
The crackdown is the result of legislation introduced as part of the executive budget and signed into law earlier this year.“Our message is simple: tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else,” Cuomo said in a statement. “These worst offenders are putting an unfair burden on the overwhelming majority of New Yorkers who are hardworking, law-abiding taxpayers. By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.”
The new initiative is estimated to increase collections in the Empire State by $26 million this fiscal year and as much as $6 million annually hereafter.
“It’s in every taxpayer’s best interest to pay all tax bills in full,” said Commissioner of Taxation and Finance Thomas H. Mattox. ”If you can’t pay in full, our staff is available to help you arrange a payment plan that will
satisfy your debt.”
The New York State Department of Taxation and Finance will send the first round of 16,000 suspension notices to delinquent taxpayers, who have 60 days from the mailing date to arrange payment with the Department. If the taxpayer fails to do so, the Department of Motor Vehicles will send a second letter
providing an additional 15 days to respond. If the taxpayer again fails to arrange payment, their license will be suspended until the debt is paid or a payment plan is established.
A taxpayer who drives while the suspension is in effect is subject to arrest and penalties, Cuomo’s office noted. Those with a suspended license can, however, apply for a restricted license, which allows them to drive to work, and return directly home.
In New York State, 96 percent of taxes are paid by businesses and individuals who voluntarily meet their tax responsibilities, Cuomo’s office noted. The remaining 4 percent is collected through the tax department's audit, collections and criminal investigations programs.
Many great businesses have been built out of hobbies and other income producing activities. Often these businesses start very small, as what some call "lifestyle" businesses that eventually create a little income. Over time, the entrepreneur is able to transition from a few evenings and weekends to a
full-time business. So, is your "business" a hobby or is your "hobby" a business?
You should know that the Internal Revenue Service is stepping up efforts to prevent taxpayers from deducting losses on activities that aren't genuine businesses run to make a profit. The problem is that it's not so easy to tell a budding business from a hobby.
Officials say new research shows taxpayer errors in this area are costing the government billions of dollars a year in unpaid taxes. Thus, auditors are "on the lookout" for people trying to deduct losses from hobbies. To underscore the agency's concern, the IRS recently issued a fact sheet that is aimed at "making sure that taxpayers know and abide by the rules."
How are you supposed to figure out whether your activity qualifies as a genuine for-profit business? That can be exceptionally tricky. The IRS says you should consider several factors. Does the time and effort put into the activity indicate you intend to make a profit? Do you and your advisers have the knowledge needed to carry on the activity as a successful business?
Another factor is whether you have made a profit in the past. The IRS says it "presumes" an activity is indeed carried on for profit if you have made a profit during at least three of the past five tax years, including the current year. The rule is different -- at least two of the past seven years -- for activities that consist primarily of breeding, showing, training or racing horses.
There are other things you can do. Obtain a business license. This can go a long way in convincing everyone of your serious intentions about making a profit. It’s generally quite inexpensive to obtain one, and in most places, it’s the law anyway. Also, go to the local print shop and have some stationary, business cards and invoices printed. Opening a separate bank account and keeping separate records are also good ways to show that you’re regularly spending time working in your business.
The key is to be cautious and realistic on how you approach your business and make sure to keep very good records. Don't mix expenses and revenues that may create red flags. And keep good records, including a separate checking account for your fledgling business venture. Finally, make sure you take advantage of
my tax expertise. Ask questions. Be proactive. It’ll keep you out of trouble.
Whether you roll the dice, bet on the ponies, play cards or enjoy slot machines, you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.
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