Tax Deadline: Shutdown or not, October 15th is coming

People have felt the effect of the government shutdown in a variety of ways.  As someone who deals with the IRS everyday, I have to say I’m enjoying the break from the phone calls, faxes, and deadlines with IRS representatives. But as the shutdown lingers on, my anxiety builds over the mad house I’ll face when the IRS employees come back.

All deadlines still apply

Despite having 90% of its staff furloughed, the IRS has made it very clear that all normal deadlines still apply. And that means the IRS wants all 2012 returns a week from today, shutdown or not. The October 15th deadline gives taxpayers who filed an extension back in April their last chance to avoid the late filing penalty.  And according to the IRS, many of the more than 12 million people who requested an extension, have yet to file.

Gay marriage and joint returns

The Windsor decision back in June adds an additional wrinkle to this year’s deadline. As I discussed yesterday, the decision paved the way for same-sex couples to file joint tax returns. Many couples that have been married for years wondered how that ability would affect this year’s and prior year returns.  Before Windsor, these couples had to file their federal tax returns as single. Afterwards, they prepared a mock, joint federal return in order to prepare their actual, joint state return (that’s a lot of tax preparation).

The IRS gave a pretty convoluted explanation about how these couples should proceed.

Tax year 2013 and going forward

For tax year 2013 (won’t be filed until next April) and going forward, married same-sex couples must file either married filing separately (MFS) or married filing jointly (MFJ).  This rule makes sense because those couples legally wed now must follow the rules set forth in IRS regulations for all married couples. And the IRS requires that all married couples file either MFS or MFJ (with some exceptions for Head of Household filing status).

Tax year 2012

For tax years 2012 (the present tax season) and all prior tax years, any same-sex couple that files a return after September 16, 2013 (the effective date of the Revenue Ruling stating this rule: 2013-17) must file married filing separately or married filing jointly. Again, that makes sense because all married couples must file MFS or MFJ.  Keep in mind this rule applies to ALL tax years filed after September 16th, 2013. Therefore, if you are a same-sex couple that married in 2009 and have not filed a tax return since your marriage, you must file your returns from now on as a married couple. Previously, this couple could have gotten away with filing as single individuals to avoid the marriage penalty.

Prior tax years

The last piece to the puzzle affects those couples that feel that filing a joint return would have benefited them (via the marriage bonus) in the years since their marriage. They couldn’t take advantage of the bonus because the federal government didn’t recognize their marriage. For those couples, they have the option, not obligation, to amend their prior year returns. The distinction between the option and obligation is an important one.

As we discussed, some married couples might not benefit from filing jointly. They also won’t benefit from filing separately. The MFS filing status limits many credits and deductions. By having the option to amend, these couples can keep their returns filed as single, without losing any credits or deductions.  

In addition, those married couples can amend their return if they desire, and receive credits or refunds owed to them. Married couples have to keep in mind, however, that they can only claim a refund for three years from the due date of a return or within two years from when any tax was paid, which ever is later.

Get a move on!

No one said being married would be easy. And for some newly recognized married couples, you have a lot to think about in a week. If you still don’t feel comfortable with your options, make sure to see your tax professional before next week’s deadline. You don’t want to miss out on any refunds. Feel free to message me as well if I can assist in any way.