Planning impact on court reversal of doma

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Re: Planning impact on court reversal of doma

Postby Aptenodytes » Thu Jun 27, 2013 8:52 pm

Phineas J. Whoopee wrote:
Aptenodytes wrote:
frugaltype wrote:It would seem to me that if a couple went through a marriage ceremony in a jurisdiction where their marriage was legal, they'd be married for federal purposes regardless of where they live in the future.

Yes, that was what was the whole fuss was about and which the Court has now ruled on.

I don't think that's right.

Up until yesterday's decision, they were not married for federal purposes even if they lived in a state where same-sex marriage is legal, or one which had no same-sex marriage itself but chose, under DOMA section 2 (referenced above) to recognize other states' actions in respect, um, I'm not an attorney, really, thereof.

Now, for federal purposes, it depends on the federal purpose and perhaps on the state of domicile. This situation will take a long time to resolve in all details.

If my understanding is wrong I welcome correction.

PJW

I don't see how the state of domicile has anything to do with it. The decision says that the Federal government must treat married citizens as married without regard to same-sex status. As I said, this is exactly what the plaintiffs sought and what the Court granted.

You are right that there are numerous details to sort out, but that doesn't undermine the principal that has been established.
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Re: Planning impact on court reversal of doma

Postby frugaltype » Thu Jun 27, 2013 9:39 pm

Aptenodytes wrote:
frugaltype wrote:It would seem to me that if a couple went through a marriage ceremony in a jurisdiction where their marriage was legal, they'd be married for federal purposes regardless of where they live in the future.

Yes, that was what was the whole fuss was about and which the Court has now ruled on.


Not according to the Times.
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Jun 27, 2013 9:54 pm

Bob's not my name wrote:Can you explain your basis for believing that amended returns will be optional? Is it based in law or are you assuming the administration will exercise prosecutorial discretion?


There is certainly precedent. When the IRS issued guidance in 2010 about honoring California community property rules for same-sex couples, it applied retroactively to tax year 2006, but couples were not required to file new returns for those years, but they were allowed to.

Will heterosexual couples be able to claim unequal treatment if gay couples are exempted from paying the marriage penalty? Retroactive tax changes always have weird effects.


Nice try, but heterosexuals who didn't want to pay the marriage penalty always had the option of getting divorced or not getting married in the first place. Many have discussed doing just that in the boglehead forums. Whereas same-sex couples with single income didn't have the option to get married to get the huge tax benefit of married filing jointly for federal tax purposes.
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Jun 27, 2013 10:03 pm

baw703916 wrote:It's hard to imagine how the IRS could identify and contact all of the people to whom this applies, even if it were legally permitted to do so.


Yes, it would be impossible for the IRS to identify all of them. They could identify some, though.

For the tax year 2012, same-sex married couples in California are required to file IRS form 8958. This form shows the SSN of the other spouse, and the allocation of income between spouses. Each spouse files form 8958 with their individual 1040 .

This 8958 form doesn't apply only to same-sex married couples though. My registered domestic partner and myself were also required to file it. We are not yet married. But we may be soon, now that prop 8 has also fallen.
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Jun 27, 2013 10:11 pm

Aptenodytes wrote:I don't see how the state of domicile has anything to do with it. The decision says that the Federal government must treat married citizens as married without regard to same-sex status. As I said, this is exactly what the plaintiffs sought and what the Court granted.


There was no issue of state of domicile vs state of marriage license in the Windsor case.
Mrs Windsor was married in Canada, and resided in the state of New York, which recognized the marriage to her spouse the year that Mrs Speier died.

If they had resided in a state that did not recognize their marriage, this would have been a different case, as they would have been unmarried in the eyes of the state.
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Jun 27, 2013 10:21 pm

To go back to the original question in this thread, I don't have a whole list, but I can think of the following way in which my partner and I have been penalized until now by not having our union recognized federally :

- inability to contribute to an IRA for my non-working partner
- inability to use FSA funds for my partner's healthcare bills
- paying federal income and medicare taxes on 100% of the healthcare premiums for my partner, including on the 80% that are paid by my employer

These are just some that come immediately to mind, but they already account for several thousands of dollars a year.
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Re: Planning impact on court reversal of doma

Postby frugaltype » Fri Jun 28, 2013 9:22 am

madbrain wrote:To go back to the original question in this thread, I don't have a whole list, but I can think of the following way in which my partner and I have been penalized until now by not having our union recognized federally :

- inability to contribute to an IRA for my non-working partner
- inability to use FSA funds for my partner's healthcare bills
- paying federal income and medicare taxes on 100% of the healthcare premiums for my partner, including on the 80% that are paid by my employer

These are just some that come immediately to mind, but they already account for several thousands of dollars a year.


I read that there are thousands of laws and regulations in the U.S. where married couples have preference. The most horrible that comes to mind is the Florida(?) case where a hospital kept a woman from the bedside of her dying partner even though the women had all the appropriate legal paperwork done and with them.
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Re: Planning impact on court reversal of doma

Postby archbish99 » Fri Jun 28, 2013 10:40 am

frugaltype wrote:I read that there are thousands of laws and regulations in the U.S. where married couples have preference. The most horrible that comes to mind is the Florida(?) case where a hospital kept a woman from the bedside of her dying partner even though the women had all the appropriate legal paperwork done and with them.


Per the Supreme Court arguments, there are a little over 1k federal laws impacted by DOMA, some of them things you might not think about. For example, it's a federal crime to kidnap the spouse of a judge, in order to dissuade criminals from attempting to influence trial outcomes. But under DOMA, it was only a crime if the spouse was of the opposite gender from the judge. :oops:

What you reference would be a matter of state law, if not simply hospital policy. If their policy was "family only," for example, and the woman was not legally related to the patient, that would apply to any non-married partners regardless of gender or orientation. (You said "partner," not "wife.") If they're making exceptions to that policy in a discriminatory fashion, that's certainly something they could be sued for, though at this point there's a lot of conjecture in the scenario.

The only impact of DOMA on that would be that a state which doesn't recognize same-sex marriage isn't compelled to do so -- and that isn't changed by the decision, which invalidated only section 3. If the couple in question wasn't married to begin with, this hasn't made any legal changes for them.
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Re: Planning impact on court reversal of doma

Postby Alan S. » Fri Jun 28, 2013 12:10 pm

Here is the CCH analysis of some of the various effects of the court decision. It will take considerable time to resolve some of these issues including additional court involvement:

http://tax.cchgroup.com/downloads/files ... ruling.pdf
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Re: Planning impact on court reversal of doma

Postby Aptenodytes » Fri Jun 28, 2013 1:40 pm

Aptenodytes wrote:
neurosphere wrote:I've gone through the thread and some of the links, but not sure I am confident about the answer to the following question:

As of TODAY, is it 100% settled that a gay couple married and living in a state which recognizes their marriage, will be able to file as "married filing jointly" for the 2013 tax year come April 2014?

It depends on what you mean by 100% settled. To the extent that any future regulatory measure can be settled, this one now is.

I read the NY Times article that was linked earlier, and realize that it claims that the contours of federal policy are entirely up in the air. That is completely different from what I have heard on the radio; I had based my answers on what I heard on the radio, and if the Times's reporting is accurate I need to retract what I said.
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Re: Planning impact on court reversal of doma

Postby madbrain » Fri Jun 28, 2013 8:07 pm

frugaltype wrote:I read that there are thousands of laws and regulations in the U.S. where married couples have preference. The most horrible that comes to mind is the Florida(?) case where a hospital kept a woman from the bedside of her dying partner even though the women had all the appropriate legal paperwork done and with them.


There are over 1130 federal laws where married couples are treated differently than unmarried (or singles).

In the case you cite however, the hospital clearly broke the law as the couple had a health care proxy and durable power of attorney, and they ignored it.
Unfortunately, her suit was dismissed.

http://en.wikipedia.org/wiki/Janice_Langbehn

She was invited to the White House.
"President Obama instructed the Secretary of Health and Human Services, Kathleen Sebelius, to make sure that any hospital that's participating in Medicare or Medicaid allow gay and lesbian partners the same privileges and visitation rights as straight partners”

Unfortunately, this continues to happen.

One just to wonder though, if we will have to carry a copy of a marriage license when traveling. It will be a very good thing to have the law on our side. But enforcement is still very difficult. I hope to never be in this kind of horrible situation.
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Re: Planning impact on court reversal of doma

Postby DiscoBunny1979 » Fri Jun 28, 2013 10:48 pm

frugaltype wrote:
madbrain wrote:To go back to the original question in this thread, I don't have a whole list, but I can think of the following way in which my partner and I have been penalized until now by not having our union recognized federally :

- inability to contribute to an IRA for my non-working partner
- inability to use FSA funds for my partner's healthcare bills
- paying federal income and medicare taxes on 100% of the healthcare premiums for my partner, including on the 80% that are paid by my employer

These are just some that come immediately to mind, but they already account for several thousands of dollars a year.


I read that there are thousands of laws and regulations in the U.S. where married couples have preference. The most horrible that comes to mind is the Florida(?) case where a hospital kept a woman from the bedside of her dying partner even though the women had all the appropriate legal paperwork done and with them.


------------

In Domestic Partnership in California, we have to file additional income on the employer paid Medical Premiums for the partner covered on the other's health plan. Last year that meant adding $6,800 to our income.

The problem in California with Domestic Partnerships is that the IRS ruled in 2010 that DPs must file as community property - but as single. That means the IRS has been treated the relationship like a business, which again is a lie. The true status is a Domestic Partnership Union and that with overturn of DOMA, the question is whether the California definition of a Domestic Partnership that grants ALL responsibilities and privileges as marriage is just as valid as a 'married' couple.

In my opinion, the issue also involves the Interstate commerce clause. One reason is that the IRS has already treated a Domestic Partnership as business partnership, and therefore, it is that unit of organization that has the right to commerce clause protections.l
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Re: Planning impact on court reversal of doma

Postby madbrain » Sat Jun 29, 2013 4:55 am

DiscoBunny1979 wrote:In Domestic Partnership in California, we have to file additional income on the employer paid Medical Premiums for the partner covered on the other's health plan. Last year that meant adding $6,800 to our income.


Yes, it's about the same for us.

The problem in California with Domestic Partnerships is that the IRS ruled in 2010 that DPs must file as community property - but as single. That means the IRS has been treated the relationship like a business, which again is a lie.


How is it like a business ?

The true status is a Domestic Partnership Union and that with overturn of DOMA, the question is whether the California definition of a Domestic Partnership that grants ALL responsibilities and privileges as marriage is just as valid as a 'married' couple.


California domestic partnerships are not recognized as marriages in federal law. Nor are civil union from other states. This doesn't really have anything to do with DOMA, however. Congress hasn't enacted any federal law to recognize these other statutes as equivalent to marriage.
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Re: Planning impact on court reversal of doma

Postby bayview » Sat Jun 29, 2013 6:59 pm

MN Finance wrote:I know this is very recent, but if anyone has read a good summary of the financial planning impacts of the court ruling Id find that very helpful. On the surface it sounds like same sex marriages (in states which have it) would result in identical treatment as currently marriedcouples wrt federal issues like estate taxes, SS benefits, etc., but I would imagine in application its more nuanced.

http://blog.sfgate.com/pender/2013/06/2 ... alifornia/

Although the article discusses implications for same-sex couples in California, it also reviews the federal aspects.
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Re: Planning impact on court reversal of doma

Postby stan1 » Sat Jun 29, 2013 8:54 pm

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Re: Planning impact on court reversal of doma

Postby Artsdoctor » Sun Jun 30, 2013 7:50 pm

As multiple posters have mentioned, there is a lot of uncertainty that will have to be ironed out over the next couple of months.

I think that for now, it might be beneficial to consider what we know with a reasonable degree of certainty. If you are in a same-sex marriage and both of you live in a state that currently recognizes same-sex marriage, you have a lot more certainty to deal with than if you both are living in a state that does not recognize same-sex marriage.

If you find yourself in the former position, I would start by familiarizing yourself with what it actually means to file federal income tax as Married since you've probably not had to think about that before. Even if you've had to file individually in a community property state, you're going to find that the tax structure is very different when filing as a married couple. Although many couples with disparate incomes will pay less in federal tax, couples who both have high incomes without significant disparity will almost certainly pay more. If this applies to you, you might consider putting more money aside to pay taxes or consider withholding more. You might want to ask your accountant what you need to do in order to avoid an underpayment penalty. You may also need to start paying the Medicare surtax of 0.9% earlier than if you were to file individually.

These are the financial suggestions that you can act on immediately if necessary. There's still a half-year to make adjustments and plan accordingly.

I really doubt very much that couples would be expected to pay back taxes for several years as questioned in posts above although I will be the first to admit that I am a doctor and not an accountant.

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Re: Planning impact on court reversal of doma

Postby runner26 » Thu Aug 29, 2013 2:26 pm

IRS ruling just in. Same-sex marrages to be recognized for tax purposes in all states where couples now live.
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Re: Planning impact on court reversal of doma

Postby The Wizard » Thu Aug 29, 2013 2:32 pm

runner26 wrote:IRS ruling just in. Same-sex marrages to be recognized for tax purposes in all states where couples now live.

For Federal income taxes, yes.
But I'm guessing most states will stay with whatever rules they have in place as regards being "married".
Would take something from the Supreme Court to force states to recognize same-sex marriages, right?
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Re: Planning impact on court reversal of doma

Postby ObliviousInvestor » Thu Aug 29, 2013 2:34 pm

runner26 wrote:IRS ruling just in. Same-sex marrages to be recognized for tax purposes in all states where couples now live.

Here's the press release:
http://www.treasury.gov/press-center/pr ... l2153.aspx
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Re: Planning impact on court reversal of doma

Postby baw703916 » Thu Aug 29, 2013 3:12 pm

The Wizard wrote:
runner26 wrote:IRS ruling just in. Same-sex marrages to be recognized for tax purposes in all states where couples now live.

For Federal income taxes, yes.
But I'm guessing most states will stay with whatever rules they have in place as regards being "married".
Would take something from the Supreme Court to force states to recognize same-sex marriages, right?


States generally require the state tax return to claim the same filing status as the Federal return. So it's not quite clear how things would work for a couple which must now file as married under Federal law but lives in a state that 1) doesn't recognize them as married and 2) requires them to use the same filing status as on the Federal return. You're right that this is an issue of state, not Federal, law.

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Re: Planning impact on court reversal of doma

Postby stan1 » Thu Aug 29, 2013 4:22 pm

Reads like the onus will be on the non-equality states to change their filing status requirement to reflect that the married couple will have a Joint federal return and 2 single state returns. Could be problematic for residents of states that drag their feet on providing updated guidance -- but progress overall for everyone.
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Re: Planning impact on court reversal of doma

Postby dphmd » Thu Aug 29, 2013 6:40 pm

Oops -- missed page two of this thread. Link already posted. Deleted.
Last edited by dphmd on Thu Aug 29, 2013 7:30 pm, edited 1 time in total.
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Re: Planning impact on court reversal of doma

Postby Jack » Thu Aug 29, 2013 6:47 pm

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.

Couples will be permitted, but not required, to file amended returns for 2010, 2011 and 2012.
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Aug 29, 2013 7:23 pm

Also, as I expected, the IRS will not recognize any domestic partnerships or civil unions from any state as equivalent to marriage. Same-sex couples must get married to get federal recognition.

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.
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Re: Planning impact on court reversal of doma

Postby dphmd » Thu Aug 29, 2013 7:38 pm

baw703916 wrote:States generally require the state tax return to claim the same filing status as the Federal return. So it's not quite clear how things would work for a couple which must now file as married under Federal law but lives in a state that 1) doesn't recognize them as married and 2) requires them to use the same filing status as on the Federal return. You're right that this is an issue of state, not Federal, law.

Brad


My guess is that most of these states will just change their tax law so that individuals who are not legally married in the state would file as "single," since that solution would be a lot easier to implement in most cases (especially in states where marriage-related constitutional amendments passed). But who knows.
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Re: Planning impact on court reversal of doma

Postby runner26 » Thu Aug 29, 2013 8:14 pm

madbrain wrote:Also, as I expected, the IRS will not recognize any domestic partnerships or civil unions from any state as equivalent to marriage. Same-sex couples must get married to get federal recognition.

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.



As reported by Patricia Cain: http://law.scu.edu/same-sex-tax/irs-ann ... x-spouses/

"The IRS further announced that Registered Domestic Partners (RDPs) and Civil Union Partners (CUPs) will NOT be treated as spouses. Again, this is not surprising because it is exactly the rule announced by OPM and other agencies — although, for the record, it is possible, because of some specific statutory language, that RDPs and CUPs WILL be treated as spouses under Social Security rules."
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Re: Planning impact on court reversal of doma

Postby runner26 » Thu Aug 29, 2013 8:19 pm

Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law
http://www.irs.gov/uac/Answers-to-Frequ ... ex-Couples
Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions
http://www.irs.gov/uac/Answers-to-Frequ ... vil-Unions
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Re: Planning impact on court reversal of doma

Postby Artsdoctor » Thu Aug 29, 2013 8:53 pm

In the past, same-sex married couples (or DPs) were required to file married state income tax returns. Many states require a federal income tax return to be submitted with the state return, and it is expected to match in every respect. Consequently, same-sex married couples were required to file a pro forma federal tax return as if they were filing as married couple. Each couple would then have four returns: one state, one federal as a married couple (pro forma), and two individual returns.

At least for now, states will not be obligated to recognize all same-sex marriages. I suspect, although cannot say for sure, that those states who do not recognize same-sex marriage will require separate, individual tax returns. This could results in the generation of five returns: two individual state returns, two individual pro forma federal returns, and one legitimate federal return for the couple.

It follows that each state will probably make its own tax rules and that residents will need to be responsible for knowing state law.

Very interesting turn of events. I have to say that I'm impressed that the IRS can to its conclusion relatively quickly. For many couples, this will result in considerable savings, especially if income is disparate. And filing previous returns retroactively could be quite a savings indeed.

Cheers.

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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Aug 29, 2013 9:18 pm

Artsdoctor wrote:In the past, same-sex married couples (or DPs) were required to file married state income tax returns.


Technically, the filing status on California form 540 is called "Married or RDP".

At least for now, states will not be obligated to recognize all same-sex marriages. I suspect, although cannot say for sure, that those states who do not recognize same-sex marriage will require separate, individual tax returns. This could results in the generation of five returns: two individual state returns, two individual pro forma federal returns, and one legitimate federal return for the couple.


This will keep the CPAs employed...
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Re: Planning impact on court reversal of doma

Postby DiscoBunny1979 » Thu Aug 29, 2013 11:04 pm

madbrain wrote:
Artsdoctor wrote:In the past, same-sex married couples (or DPs) were required to file married state income tax returns.


Technically, the filing status on California form 540 is called "Married or RDP".

At least for now, states will not be obligated to recognize all same-sex marriages. I suspect, although cannot say for sure, that those states who do not recognize same-sex marriage will require separate, individual tax returns. This could results in the generation of five returns: two individual state returns, two individual pro forma federal returns, and one legitimate federal return for the couple.


This will keep the CPAs employed...


--------------

It's "married or RDP" because technically, California treat RDPs as having the same rights and responsibilities as married couples, including having to get divorced in divorce court. Therefore, it's my impression that in California, while there has been a fight use the term "married" for California same sex partners, RDPs have been 'married' even though that term did not apply. In my opinion, a DP, a union, a civil arrangement, is still a marriage. It's two people providing for each other financially, emotionally, and in every way imaginable. What's so hard for the Federal Government to recognize that? Other than the fact that some laws only recognizes the word "marriage".

Interstate Commerce is one of my concerns to overturn the allowing individual states to only recognize the definition of 'marriage' they want to use. For instance, For those living in a state where Vanguard does not have an actual building location . . . if Vanguard is in a state that does not recognize same sex marriage, will Vanguard allow for transfers of ROTH IRAs to same sex partners in those states that allow for such marriages if it conflicts with the state or even Vanguard's business model? For instance, spouses can treat another spouse's IRA as their own . . . since such IRAs will now pass over state lines to surviving same sex couples, does that trigger the Interstate Commerce Laws for fair and equal treatment?
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Re: Planning impact on court reversal of doma

Postby tom0153 » Thu Aug 29, 2013 11:27 pm

This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Be sure, if applicable, to file claims for refund within your applicable statute of limitations (so, if you generally file on October 15 taking full advantage of an extension, you still have a little time left for your earliest claim).

For something pretty readable, see: http://www.marketwatch.com/story/1f2c75 ... teid=nwhpf
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Re: Planning impact on court reversal of doma

Postby madbrain » Thu Aug 29, 2013 11:34 pm

DiscoBunny1979 wrote:It's "married or RDP" because technically, California treat RDPs as having the same rights and responsibilities as married couples, including having to get divorced in divorce court.


Correct, RDPs and married couple have mostly the same state rights in California, though there are a few minor differences, such as the joint residency requirement which prevents someone from getting a domestic partnership while in prison, even though a prisoner can get married. The small differences don't matter to most people.

What's so hard for the Federal Government to recognize that? Other than the fact that some laws only recognizes the word "marriage".


It's not just "some laws". There isn't a single federal law that recognizes "civil unions" or "domestic partnerships". All federal laws recognize only marriage.
It would be very hard to change them all - essentially impossible with the current Congress. This is why the LGBT community fought so hard to be able to use the name.

In many states other than California, domestic partnerships are also not equal to marriage - it's not just the name that differs.
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Re: Planning impact on court reversal of doma

Postby Jack » Fri Aug 30, 2013 12:11 am

tom0153 wrote:This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Matt Yglesias (perhaps tongue in cheek) pointed out that this ruling provides the textbook Keynesian economic stimulus. In the short run only people expecting refunds from the government will be amending their income taxes which means more short-term government spending, but in the long run the marriage penalty for couples will increase revenues to the government and reduce deficits.
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Re: Planning impact on court reversal of doma

Postby tom0153 » Fri Aug 30, 2013 12:44 am

Jack wrote:
tom0153 wrote:This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Matt Yglesias (perhaps tongue in cheek) pointed out that this ruling provides the textbook Keynesian economic stimulus. In the short run only people expecting refunds from the government will be amending their income taxes which means more short-term government spending, but in the long run the marriage penalty for couples will increase revenues to the government and reduce deficits.


There is a pessimist for every situation!

If I had to guess, I think I'd agree with you about the pen name.
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Fri Aug 30, 2013 8:36 pm

Jack wrote:
tom0153 wrote:This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Matt Yglesias (perhaps tongue in cheek) pointed out that this ruling provides the textbook Keynesian economic stimulus. In the short run only people expecting refunds from the government will be amending their income taxes which means more short-term government spending, but in the long run the marriage penalty for couples will increase revenues to the government and reduce deficits.


He is overstating the tax impact. There are estimated to be only 114,100 same sex couples who are legally married which will not have a material impact on tax collections since the number of same sex married couples is less than 0.1% of all tax returns filed. There is more stimulus derived from veterans disability benefits which total $70B a year and are increased for cola.

http://www.nytimes.com/2013/06/27/your- ... gewanted=1

The IRS ruling will require all same sex couples who are legally married to file either a joint return or married filing separately beginning 2013.

One interesting aspect of the IRS decision is that those employees who were legally married in prior years and paid extra income tax because the employer health insurance for their partner was considered to be taxable income can get a refund for taxes paid on the health insurance back to 2010 if they file an amended return.
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Re: Planning impact on court reversal of doma

Postby madbrain » Fri Aug 30, 2013 8:52 pm

manwithnoname wrote:
Jack wrote:
tom0153 wrote:This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Matt Yglesias (perhaps tongue in cheek) pointed out that this ruling provides the textbook Keynesian economic stimulus. In the short run only people expecting refunds from the government will be amending their income taxes which means more short-term government spending, but in the long run the marriage penalty for couples will increase revenues to the government and reduce deficits.


He is overstating the tax impact. There are estimated to be only 114,100 same sex couples who are legally married which will nave not material impact on tax collections.

http://www.nytimes.com/2013/06/27/your- ... gewanted=1

The IRS ruling will require all same sex couples who are legally married to file either a joint return or married filing separately beginning 2013.

One interesting aspect of the IRS decision is that those employees who were legally married in prior years and paid extra income tax because the employer health insurance for their partner was considered to be taxable income can get a refund for taxes paid on the health insurance back to 2010 if they file an amended return.


I'm not sure what constitutes "material impact", but for couples that have disparate income, the IRS "marriage non-recognition penalty" can be very expensive. I have calculated it to be about $5000 - $10000 each year for us. Of course not every couple is affected the same way. But only couples with disparate incomes will refile. Assuming that half of them do, for 3 years, that's 57000 * 3 * 5000 = $855 million.
That number may not be material to the IRS, but it would be to me :)
Of course the number is probably less based on lower average income, but I wouldn't be surprised if it's in the $500 million range.
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Re: Planning impact on court reversal of doma

Postby tom0153 » Fri Aug 30, 2013 9:01 pm

manwithnoname wrote:http://www.nytimes.com/2013/06/27/your- ... gewanted=1

The IRS ruling will require all same sex couples who are legally married to file either a joint return or married filing separately beginning 2013.

One interesting aspect of the IRS decision is that those employees who were legally married in prior years and paid extra income tax because the employer health insurance for their partner was considered to be taxable income can get a refund for taxes paid on the health insurance back to 2010 if they file an amended return.


The latter is an important point; if anyone is unsure about whether this applies, better check your W-2, or check in with your tax preparer, or your personnel department.
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Fri Aug 30, 2013 9:16 pm

madbrain wrote:
manwithnoname wrote:
Jack wrote:
tom0153 wrote:This introduces more broadly the concept of the marriage penalty tax to a new strata of the population. It will not always be advantageous, from a purely tax vantage, to pursue marriage.

Matt Yglesias (perhaps tongue in cheek) pointed out that this ruling provides the textbook Keynesian economic stimulus. In the short run only people expecting refunds from the government will be amending their income taxes which means more short-term government spending, but in the long run the marriage penalty for couples will increase revenues to the government and reduce deficits.


He is overstating the tax impact. There are estimated to be only 114,100 same sex couples who are legally married which will nave not material impact on tax collections.

http://www.nytimes.com/2013/06/27/your- ... gewanted=1

The IRS ruling will require all same sex couples who are legally married to file either a joint return or married filing separately beginning 2013.

One interesting aspect of the IRS decision is that those employees who were legally married in prior years and paid extra income tax because the employer health insurance for their partner was considered to be taxable income can get a refund for taxes paid on the health insurance back to 2010 if they file an amended return.


I'm not sure what constitutes "material impact", but for couples that have disparate income, the IRS "marriage non-recognition penalty" can be very expensive. I have calculated it to be about $5000 - $10000 each year for us. Of course not every couple is affected the same way. But only couples with disparate incomes will refile. Assuming that half of them do, for 3 years, that's 57000 * 3 * 5000 = $855 million.
That number may not be material to the IRS, but it would be to me :)
Of course the number is probably less based on lower average income, but I wouldn't be surprised if it's in the $500 million range.


I was opining on the macro $ impact of increased tax collections due to all 114,100 same sex married couples being required to file joint federal tax returns beginning 2013 which will not increase tax collections by .1% of the $1T income tax collected. I did not project how much more individual sex couples will pay but there will both winners and losers with the result of the change being revenue neutral.

I don't know were you got the numbers from so I don't know how it will play out but even $500M is .05% of $1T income tax collected which is a rounding error.
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Fri Aug 30, 2013 9:48 pm

Aptenodytes wrote:
Phineas J. Whoopee wrote:
Aptenodytes wrote:
frugaltype wrote:It would seem to me that if a couple went through a marriage ceremony in a jurisdiction where their marriage was legal, they'd be married for federal purposes regardless of where they live in the future.

Yes, that was what was the whole fuss was about and which the Court has now ruled on.

I don't think that's right.

Up until yesterday's decision, they were not married for federal purposes even if they lived in a state where same-sex marriage is legal, or one which had no same-sex marriage itself but chose, under DOMA section 2 (referenced above) to recognize other states' actions in respect, um, I'm not an attorney, really, thereof.

Now, for federal purposes, it depends on the federal purpose and perhaps on the state of domicile. This situation will take a long time to resolve in all details.

If my understanding is wrong I welcome correction.

PJW

I don't see how the state of domicile has anything to do with it. The decision says that the Federal government must treat married citizens as married without regard to same-sex status. As I said, this is exactly what the plaintiffs sought and what the Court granted.

You are right that there are numerous details to sort out, but that doesn't undermine the principal that has been established.


APTENODYTES:

Whether state of domicile of the same sex couple matters depends on what federal law is being applied. Since the IRS did not have a definition of what state law determined marital status it could apply the rule that all same sex couples who are legally married under state/foreign law will be required to file a joint tax return regardless of the law of the state where they reside. However SS has relied on a rule that determines martial status based on the state law where the couple resides not the state where they were married. Its up to SS to decide whether to change their rule.
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Re: Planning impact on court reversal of doma

Postby madbrain » Fri Aug 30, 2013 9:59 pm

manwithnoname wrote:[Whether state of domicile of the same sex couple matters depends on what federal law is being applied. Since the IRS did not have a definition of what state law determined marital status it could apply the rule that all same sex couples who are legally married under state/foreign law will be required to file a joint tax return regardless of the law of the state where they reside. However SS has relied on a rule that determines martial status based on the state law where the couple resides not the state where they were married. Its up to SS to decide whether to change their rule.


Indeed. And similarly, there are other laws that govern the military for purpose of VA disability benefits. Parts of title 38 explicitly recognizes only opposite-sex couples.
The Congress would need to act on this (very unlikely) , or a Court would need to find this unconstitutional, just like many courts did for the federal DOMA.

Edit : looks like one court just did, today.
http://www.miamiherald.com/2013/08/30/3 ... efits.html
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Fri Aug 30, 2013 10:36 pm

madbrain wrote:
manwithnoname wrote:[Whether state of domicile of the same sex couple matters depends on what federal law is being applied. Since the IRS did not have a definition of what state law determined marital status it could apply the rule that all same sex couples who are legally married under state/foreign law will be required to file a joint tax return regardless of the law of the state where they reside. However SS has relied on a rule that determines martial status based on the state law where the couple resides not the state where they were married. Its up to SS to decide whether to change their rule.


Indeed. And similarly, there are other laws that govern the military for purpose of VA disability benefits. Parts of title 38 explicitly recognizes only opposite-sex couples.
The Congress would need to act on this (very unlikely) , or a Court would need to find this unconstitutional, just like many courts did for the federal DOMA.

Edit : looks like one court just did, today.
http://www.miamiherald.com/2013/08/30/3 ... efits.html


The VA Doma provision is clearly unconstitutional as determined by the District Ct since it is a verbatim copy of 1 USC 7 (DOMA). The only question is whether the VA will continue appeal process until all appeals are exhausted ( i.e., supremes deny cert) before allowing vets benefits to same sex couples or whether it will write its own regulation for same sex benefits now that it has received an adverse decision from a federal court.

VA doesn't need for Congress to repeal law that has been ruled unconstitutional before writing rules for same sex marriage benefits.
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Fri Aug 30, 2013 10:59 pm

Artsdoctor wrote:In the past, same-sex married couples (or DPs) were required to file married state income tax returns. Many states require a federal income tax return to be submitted with the state return, and it is expected to match in every respect. Consequently, same-sex married couples were required to file a pro forma federal tax return as if they were filing as married couple. Each couple would then have four returns: one state, one federal as a married couple (pro forma), and two individual returns.

At least for now, states will not be obligated to recognize all same-sex marriages. I suspect, although cannot say for sure, that those states who do not recognize same-sex marriage will require separate, individual tax returns. This could results in the generation of five returns: two individual state returns, two individual pro forma federal returns, and one legitimate federal return for the couple.

It follows that each state will probably make its own tax rules and that residents will need to be responsible for knowing state law.

Very interesting turn of events. I have to say that I'm impressed that the IRS can to its conclusion relatively quickly. For many couples, this will result in considerable savings, especially if income is disparate. And filing previous returns retroactively could be quite a savings indeed.

Cheers.

Artsdoctor


What states require taxpayer to file a federal income tax return with the state tax return? Its a stupid waste of paper. Most states only require a taxpayer to file selected federal schedules such as Sked C, D or E. NJ allows same sex couples to file NJ joint tax return as either domestic partnerships or civil unions without filing a federal tax return.
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Re: Planning impact on court reversal of doma

Postby LadyGeek » Fri Aug 30, 2013 11:13 pm

Please stay focused on the personal finance / investing aspects.

Note that discussions about enacted laws or regulations that affect the individual investor are permitted.

We need to avoid opinions of the legislative process, which tend to create contentious disagreements among the members. It is why the policy (no politics) was put in place. The latest example of what can happen is here: Re: the state of unfunded state pension obligations We may be starting down this path.

Please avoid further opinions, such as the sanity of the tax filing system or constitutionality of certain laws.
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Re: Planning impact on court reversal of doma

Postby dphmd » Sat Aug 31, 2013 5:59 pm

I did not see this point previously commented on, but one of the major changes that will accompany this decision is the way the IRS treats same-sex partner health insurance. With DOMA, even if individuals were legally married, the benefits were considered taxable income (with certain exceptions). Now such benefits will be tax-free for legally-married individuals.

SS remains the big unanswered question. For individuals legally married in their state, survivorship benefits are a major benefit. What they do for individuals legally married in one state but residing in a state that does not recognized their marriage will be important to resolve.
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Re: Planning impact on court reversal of doma

Postby madbrain » Sun Sep 01, 2013 5:06 am

dphmd wrote:I did not see this point previously commented on, but one of the major changes that will accompany this decision is the way the IRS treats same-sex partner health insurance. With DOMA, even if individuals were legally married, the benefits were considered taxable income (with certain exceptions). Now such benefits will be tax-free for legally-married individuals.


I mentioned it in the 5th post in this thread.

I wonder about spousal IRAs for non-working spouses for those couples refiling their federal tax returns for the last 3 years.
Will the spouses now be allowed to contribute to their IRAs for those years, since they were unlawfully prevented from doing so ?
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Re: Planning impact on court reversal of doma

Postby monocle » Sun Sep 01, 2013 6:03 am

MN Finance wrote:I know this is very recent, but if anyone has read a good summary of the financial planning impacts of the court ruling Id find that very helpful. On the surface it sounds like same sex marriages (in states which have it) would result in identical treatment as currently marriedcouples wrt federal issues like estate taxes, SS benefits, etc., but I would imagine in application its more nuanced.


http://www.dailyfinance.com/2013/08/29/ ... t-returns/
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Re: Planning impact on court reversal of doma

Postby dphmd » Sun Sep 01, 2013 12:37 pm

madbrain wrote:
dphmd wrote:I did not see this point previously commented on, but one of the major changes that will accompany this decision is the way the IRS treats same-sex partner health insurance. With DOMA, even if individuals were legally married, the benefits were considered taxable income (with certain exceptions). Now such benefits will be tax-free for legally-married individuals.


I mentioned it in the 5th post in this thread.


Aha -- yes. Sorry about that. After about 50 posts I start skimming, and I miss stuff. :happy
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Thu Sep 05, 2013 8:31 pm

manwithnoname wrote:
madbrain wrote:
manwithnoname wrote:[Whether state of domicile of the same sex couple matters depends on what federal law is being applied. Since the IRS did not have a definition of what state law determined marital status it could apply the rule that all same sex couples who are legally married under state/foreign law will be required to file a joint tax return regardless of the law of the state where they reside. However SS has relied on a rule that determines martial status based on the state law where the couple resides not the state where they were married. Its up to SS to decide whether to change their rule.


Indeed. And similarly, there are other laws that govern the military for purpose of VA disability benefits. Parts of title 38 explicitly recognizes only opposite-sex couples.
The Congress would need to act on this (very unlikely) , or a Court would need to find this unconstitutional, just like many courts did for the federal DOMA.

Edit : looks like one court just did, today.
http://www.miamiherald.com/2013/08/30/3 ... efits.html


The VA Doma provision is clearly unconstitutional as determined by the District Ct since it is a verbatim copy of 1 USC 7 (DOMA). The only question is whether the VA will continue appeal process until all appeals are exhausted ( i.e., supremes deny cert) before allowing vets benefits to same sex couples or whether it will write its own regulation for same sex benefits now that it has received an adverse decision from a federal court.

VA doesn't need for Congress to repeal law that has been ruled unconstitutional before writing rules for same sex marriage benefits.


As I predicted in the above post less than a week ago, the Justice Department will prohibit the VA from enforcing the DOMA provision in 38 USC (VA benefits law) that prevented same sex couples from receiving veterans benefits. Effective immediately the VA will provide Veterans benefits to same sex couples who are legally married in the state where they reside or the state where the Vet was discharged. This rule is more restrictive than the IRS rule for marital status which applies to all same sex couples who were married in a state that recognizes same sex marriage regardless of where they file their tax returns.

http://www.foxnews.com/politics/2013/09 ... x-couples/

"It is the AG’s long established view that title 38 is unconstitutional,” said the DOJ official “We're not going to defend it in court. We're not going to enforce it.”
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Re: Planning impact on court reversal of doma

Postby linguini » Mon Sep 09, 2013 1:51 pm

madbrain wrote:
dphmd wrote:I did not see this point previously commented on, but one of the major changes that will accompany this decision is the way the IRS treats same-sex partner health insurance. With DOMA, even if individuals were legally married, the benefits were considered taxable income (with certain exceptions). Now such benefits will be tax-free for legally-married individuals.


I mentioned it in the 5th post in this thread.

I wonder about spousal IRAs for non-working spouses for those couples refiling their federal tax returns for the last 3 years.
Will the spouses now be allowed to contribute to their IRAs for those years, since they were unlawfully prevented from doing so ?


No idea, but I'm guessing the number of married same sex couples living in a single earner household who wanted to contribute to a spousal IRA but were prohibited at the time and care enough to insist on retroactive contributions must be pretty small, so it doesn't have much practical importance. It's an interesting academic question though.
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Re: Planning impact on court reversal of doma

Postby manwithnoname » Mon Sep 09, 2013 3:06 pm

linguini wrote:
madbrain wrote:
dphmd wrote:I did not see this point previously commented on, but one of the major changes that will accompany this decision is the way the IRS treats same-sex partner health insurance. With DOMA, even if individuals were legally married, the benefits were considered taxable income (with certain exceptions). Now such benefits will be tax-free for legally-married individuals.


I mentioned it in the 5th post in this thread.

I wonder about spousal IRAs for non-working spouses for those couples refiling their federal tax returns for the last 3 years.
Will the spouses now be allowed to contribute to their IRAs for those years, since they were unlawfully prevented from doing so ?


No idea, but I'm guessing the number of married same sex couples living in a single earner household who wanted to contribute to a spousal IRA but were prohibited at the time and care enough to insist on retroactive contributions must be pretty small, so it doesn't have much practical importance. It's an interesting academic question though.


Cant make retroactive contributions to an IRA. Under tax law all contributions for a tax year must be made by April 15 of following year.
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