DOMA Demands Couples Reconsider Their Taxes
NEW YORK (TheStreet) -- Same-sex couples eligible to get married in 13 U.S. states may not place taxes on their matrimonial priorities list, but the Supreme Court's ruling to dissolve the Defense of Marriage Act demands consideration.
"There is enormous cause for joy, but before couples make hasty emotional decisions, they need to make sure they understand what marriage means to their personal finances," says certified public accountant Elisha Wiesenberg of Wiesenberg & Co., an L.A. tax services company.
"Last week's change in the law is going to impact a married couple's financial life, from the way they file taxes to how they plan their estates and receive benefits, and they need to understand those consequences," he says. "They'll want to take time to sit down with an accountant and also have some honest conversations with each other about finances. This is a potentially huge change for thousands of long-term couples who have gotten used to things the way they are, and one that has very real, long-lasting financial implications for them."
Tax management should be simplified for same-sex couples. But some headaches await, especially in California, where there's an archaic law on the books requiring married couples to "first combine and then split" their income before filing taxes, Wiesenberg says. The Internal Revenue Service is expected to rule on the law.
As a result of the ruling, Wiesenberg says, same-sex newlyweds can expect:
Easier filing. Tax filing should be way easier for same-sex couples. Traditionally, federal tax reporting is simpler for married couples than it is for non-married couples sharing a residence.
Lower preparation prices. The cost for professional tax services should decline for same-sex couples. That's because tax filing is less complicated for married couples than for nonmarried couples, he says.
Potential penalties. Same-sex newlyweds may well wind up paying more in taxes, thanks to the infamous "marriage penalty," although circumstances differ depending on the state. "In community property states like California, the IRS already recognized combined income, which created a favorable tax treatment," Wiesenberg says. "However, federal recognition of marriage could subject couples to marriage penalty taxes, which can add thousands of dollars to tax bills each year."
Amending old returns. As states have different rules on marriage and taxes, Wiesenberg advises working with a tax specialist to possibly amend previous years' tax filings to claim extra savings.
With what he describes as "myriad" tax rules affecting same-sex couples, Wiesenberg says not to assume anything. He advises checking with a tax professional to get every dime in savings possible on your tax returns, and the sooner, the better.