Post‑Windsor Social Security and Tax Guidance for Same‑Sex Couples (June 2013)

June 27, 2013 SOCIAL SECURITY BENEFITS Because of DOMA, same-sex married cou- ples did not have the same benefits under Social Security that opposite-sex married couples have enjoyed for many years. Unlike opposite-sex couples, for example, there are no survivor benefits for the surviving spouse of a same-sex married couple. Also, the di- vorced spouse of a formerly married same- sex couple cannot not claim benefits based on the earnings of his or her ex-spouse. IMPACT. The Social Security Adminis- tration (SSA) has based federal rights to benefits on whether marital rights exist in the couples current state of residence rather than the state in which they were married. The impact of Windsor on the manner in which federal agencies will treat Social Security benefits remains to be sorted out. When an individual dies, his or her surviving spouse may be Survivor Benefits. eligible for Social Security benefits if the surviving spouse is age 60 or older, age 50 or older and disabled, or any age if he or she is caring for the decedent’s child who is younger than age 16 or disabled and enti- tled to Social Security benefits on the record of the deceased individual. With DOMA having been struck down, survivor benefits previously available only to opposite-sex married couples are now presumably avail- able to same-sex married couples. The SSA is expected to provide guidance. Divorced Spouses. If an individual is di- vorced, his or her ex-spouse may qualify for Social Security benefits based on that individual’s earnings. Generally, a divorced spouse must have been married to the in- dividual for at least 10 years and have been divorced at least two years. Additionally, the divorced spouse must be at least age 62, unmarried and ineligible for an equal or greater benefit based on his or her own earnings or the earnings of someone else. ‘These benefits are now presumably available to divorced individuals who were previously in a same-sex marriage. The SSA is expected to provide guidance. Death Benefits. The SSA pays a one- time death benefit of $255 to the dece- dent’s surviving spouse in an opposite-sex marriage or minor child. The SSA will presumably now pay the one-time death benefit to the surviving spouse in a same- sex marriage. EFFECTIVE-DATE ISSUES Determination of the effective date for ap- plying the Supreme Court's holding to fed- eral tax law is not straightforward in all cases and will necessitate further guidance from the IRS. Same-sex married couples who were not considered married under federal law prior to the Supreme Court decision are presumably not just considered married starting on the date of the Supreme Court’s decision, June 26, 2013 but are considered married retroactively to the date of their marriage pursuant to state law. This retro- active effective date raises a number of im- mediate federal tax issues: m Should same-sex couples now file amended returns claiming joint return status? m Are same-sex couples now required to amend past-year returns for joint status even if they did better tax-wise overall by filing separately as unmarried indi- viduals? m Will the IRS consider the Supreme Court’s decision in determining marital status when auditing prior-year returns? Amended Joint Returns/Claims For Re- fund. Amended returns are filed to correct errors made on previous returns. Although the Internal Revenue Code does not specifi- cally permit amended returns, the IRS usu- ally accepts them. But while the IRS’s dis- cretion to accept or reject amended returns has been recognized, courts have required the IRS to accept amended returns where its rejection of them has been found to be arbitrary and unjust. Limitations Period. The statute of limita- tions for amending or auditing a return is STATES THAT RECOGNIZE SAME-SEX MARRIAGE Connecticut Delaware(1) lowa Maine Maryland Massachusetts Minnesota(2) New Hampshire New York Rhode Island(2) Vermont Washington District of Columbia *As of June 27, 2013 (1) Effective July 1, 2013 (2) Effective August 1, 2013 Note: California granted marriage li- censes to same-sex couples from June 16, 2008 to November 5, 2008. Note: The Little Traverse Bay Bands of Odawa Indians in Michigan, the Coquille Native American Nation in Oregon and the Suquamish Native American Nation in Washington recognize same-sex marriage. Note: 37 States have laws expressly restricting marriage to opposite-sex couples. STATES THAT RECOGNIZE SAME-SEX UNIONS/DOMESTIC PARTNERSHIPS California Colorado Hawaii Illinois Nevada New Jersey Oregon Wisconsin generally three years from the filing date or two years from the date taxes are paid, which- ever is later. This rule may generally apply for same-sex married couples as follows: CCH Tax Briefing HOUSE_OVERSIGHT_029313