Courtesy of Nanette Lee Miller, CPA
1. Married Tax Status
Determine if there is any benefit to filing amended income tax returns using “married” status. Married tax status, as compared to single or head of household status, could result in a lower joint tax liability because of the netting of income and deductions, eligibility for certain tax credits, and income exclusions. It could also result in an increased tax liability due to the marriage penalty tax or because of limitations on deductions based on combined adjusted gross income. File amended returns as soon as possible. Amended returns must be filed before the Statute of Limitations runs—generally 3 years from the filing of the original return or 2 years from when the tax was paid, whichever
2. Non-taxable Fringe Benefits
Consider amending income tax returns to exclude previous taxable income that was used to purchase job-related benefits for your spouse, such as health insurance, life insurance, and other fringe benefits. Employers may be entitled to a refund of matching FICA payments on fringe benefits that are now non-taxable. The Statute of Limitations for refund claims also applies.
3. Employer Spousal Benefits
Save current tax dollars by contacting your company’s Human Resources Department for a list of marital benefits available. Take advantage of all non-taxable fringe benefits available to your spouse. Also, look for a benefit that may pay
you a buy-back amount if you no longer need employer-paid benefits (because you are
now covered under your spouse’s plan).
4. Retirement Accounts
To save taxes your beneficiaries will pay after your death and allow the pay out to be stretched out as long as possible, check your IRA/401K plan designations. A same-sex spouse may now elect to roll over such a plan to his/her own IRA plus postpone required minimum distributions until he/she turns 70 1/2. Also, consider making a year-end retirement account contribution for your spouse (if applicable) and receive an additional deduction.
5. Social Security
Apply for social security marital benefits and the lump sum death benefit, if applicable. Currently, the Social Security Administration is only processing claims for same-sex married couples who reside in a state that recognizes their marriage. If you reside in a state that recognizes same-sex marriage, apply for benefits before you move to a state that does not recognize same-sex marriages.
6. Estate Taxes
If your spouse died and the estate paid estate taxes on the portion of the estate that you inherited, file a claim for refund. If you and your spouse did not do any estate planning prior to death, be sure to consult with an attorney or an accountant in a timely manner, as there are estate planning techniques and elections available for married couples after death. Even if you are not required to file a federal estate tax return, consider filing one to take advantage of portability. Portability allows your deceased spouse’s unused federal exemption amount to be rolled over to you as the surviving spouse. The estate must timely file an estate tax return to elect portability.
7. Making Gifts
Consider the effect of transferring assets, gift tax free, to your spouse. When making gifts to loved ones and children, consider the benefits of gift-splitting. One spouse may now utilize the other spouse’s annual gift tax exclusion amount by electing to split gifts (annual gift tax exclusion: $14,000 for 2013 and 2014).
8. Estate Planning
If you reside in a state that has a death tax and recognizes same-sex marriages, establish a marital trust, Qualified Terminable Interest Property Trust (QTIP) or disclaimer trust for your spouse in your Will. If you reside in a jurisdiction that does not recognize same-sex marriages, you must plan as if you are single and execute a Will as state laws control inheritance rights. Your spouse will not automatically inherit or
be entitled to any of your estate if you die without a Will.
9. Payroll Tax Withholding
Update your Form W-4 with your employer to change your status to married and increase or decrease your exemptions. Make a note and place it with your tax preparation documents so your tax preparer can advise you if another revision is recommended.
10. Other Points
Same-sex couples in a Domestic Partnership or Civil Union should consider getting married, as different laws apply. Same-sex married couples who divorce may now be able to take a deduction for alimony payments. Same-sex spouses may now take advantage of innocent spouse protection rules.
Nanette Lee Miller, CPA, is the National Leader of Marcum LLP’s LGBT Practice Group. Marcum LLP is one of the largest independent public accounting and advisory services firms in the nation. For more information, please visit: www.marcumllp.com/lgbt