Gay Couples: Filing an IRS Claim for DOMA-Related Tax Refunds
Gay couples could file a claim with the IRS for DOMA-related tax refund claims after the Windsor case.
The IRS did not recognize same sex marriages for tax purposes until 2013 after the Supreme Court overturned some key provisions of the Defense of Marriage Act. The IRS was prevented from recognizing same-sex marriages because of the Defense of Marriage Act (DOMA), a federal law Congress passed in 1996 that bars federal recognition of same-sex marriages for all purposes, including insurance benefits for government employees, Social Security survivors' benefits, immigration, and the filing of joint tax returns. Under DOMA, gay couples could not file joint tax returns. Instead, they had to file their taxes as if they were unmarried individuals. This could result in additional taxes.
In one case, Edith Windsor married her partner in Canada and later inherited a substantial sum when the partner died. She ended up having to pay $363,053 in federal estate taxes because the IRS refused to recognize her as the surviving spouse of her deceased partner. Had the couple's marriage been recognized by the IRS, there would have been no federal estate taxes owed due to the unlimited marital deduction.
Windsor sued the federal government claiming that DOMA was unconstitutional. The federal appeals court in New York agreed with her, holding that the law violated gay peoples' right to equal protection under the law (Windsor v. United States). The United States Supreme Court agreed to hear the appeal. The Supreme Court agreed that DOMA is unconstitutional and struck down certain key provisions. As a result, the IRS recognized same-sex marriages and same-sex couples could claim refunds for federal tax overpayments made in the past when they were prevented from filing jointly.
In the aftermath of the Windsor case and prior to the Supreme Court's decision in Obergefell v. Hodges making same sex marriages legal in every state, there was uncertainty about how the IRS would treat tax filings by same-sex married couples who lived in a state that did not recognize same-sex marriage. This is because the IRS used the taxpayer's state of residence to determine whether he or she was married for tax purposes. At the time, not all states recognized same sex marriage. After the Windsor case, it was clear that same-sex spouses who lived in states that recognized same sex marriage would be able to file joint federal income tax returns as married couples. However, it appeared that same-sex spouses who lived in a state that did not recognize same-sex marriage would continue to be treated as unmarried by the IRS. For example, a same-sex couple who were married in a state that recognized same sex marriage but later moved to a state that didn't would be treated as unmarried.
On August 29, 2013, the U.S. Department of Treasury and the IRS ruled that same-sex couples legally married in any jurisdiction would be treated as married for federal tax purposes, regardless of whether or not the couple lives in a state that recognizes same-sex marriage. "[This] ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide." said Secretary Jacob J. Lew. Now, all legally married same-sex couples can (and must) file as married beginning with their 2013 tax returns.
For same-sex spouses, filing jointly could result in an income tax reduction. In this event, they may be entitled to a tax refund for prior years. This can be accomplished by filing an amended tax return for each of the years involved. There is generally a three-year statute of limitations on refund claims. This means that taxpayers must file their claims within three years after the year of the return involved.
See the LGBT law area of Nolo's website for updates in this area, including the Supreme Court's ruling in the Obergefell v. Hodges case making same sex marriage legal in all states.