Amending Same-Sex Couples

[AppleFlag]

Now that we are actively starting to amend same-sex couples who have been legally married under federal law, some practical questions are coming up . . . namely if you amend 2010 (filing status MFJ), are you then required to amend 2011 and 2012 as well? Seems like the IRS wouldn't want us indiscriminately choosing which years to use the more advantageous filing status & leaving other years as is??

Also, any advice on how to create the 2010 amended return in ATX if the same-sex couple was not a previous client? Create a pro-forma 1040 return (MFJ) and Form 1040X separately, and file those with attached copies of the originally-filed 1040 returns from the clients?

[joanmcq]

Hi AppleFlag & welcome to the board. I do a ton of these returns in my practice. Oddly enough, you can pick and choose which years to amend based on whether it's advantageous to your clients or not. Don't forget to look at spousal health care benefits that may have been taxed in the past. One thing though; if you amend for any benefit of marriage (like removing imputed income from health insurance) you have to amend to married for all. In other words, you can't pick & choose within a year, amending to remove the health insurance income but not to MFJ or MFS.

What I do is enter the more complicated return, whoever will end up as 'taxpayer' on the joint return, hit 'amend' and then just add the spouse's income & deductions. You only need to file one amended return. I don't attach any of the originally filed copies, but do attach the forms & schedules that changed.

[Pacun]

I would amend all 3 years.

Who will appear on the top of the 1040X? I will recreate his/her 1040 as it was filed. I will make sure everything matches, save it and then invoke the "amend return" command by pulling down the file menu. Then I would add the spouse's name and then I would add their income and print the new 1040X. Don't forget to include the explanation on page of 1040X.

[Guest Taxed]

I agree with joanmcq. You have to look at each year and see if it makes financial sense. I think i posted before that I was expecting a big rush to amend but it did not work out that way.

[Mr. Pencil]

if you amend 2010 (filing status MFJ), are you then required to amend 2011 and 2012 as well?

Welcome to the community, and thanks for an excellent question! I hope you stay around and ask and answer some more, because we need a boost in the community property category.

I think Joanmcq had the answer for you. Let us know if there is something like a carryover or a suspended loss that affects 2011/2012, 'cause that would take some more thought! Does AZ accept the out-of-state marriage as legal?

[Lion EA]

I also agree with Joan's interpretation that amending is optional and a year-by-year decision.

I think my method is similar to Joan's if neither client is in my system. Create the return the way it should be as MFJ, as if your amendment is really an original return (depending on what was done, you may not be able to match one of the originals, if there were DIY-type errors, for instance). Then, call up your 1040X, but do NOT allow your numbers to move to column A, you want them to remain in column C. Then type in the numbers from the original return of the taxpayer that will appear first into column A. At this point, your software should do the math and the spouse's numbers from the original return will be in column B; if not, adjust where necessary. Add the explanation, and you're ready to review and print. Don't spend a lot of time trying to duplicate the original return, because you don't need all the detail.

[joanmcq]

I've used Lion's method when the clients already exist in my system; for example in CA there would already be an MFJ return for state filing, so I change the column A numbers to match the 'taxpayer' return after 'amending' the return I've already used as the proforma for the CA filing.

The IRS FAQs for same-sex couples are here: http://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples

It doesn't matter if AZ accepts the marriage, the feds do. So for all federal purposes, the couple is married even if their resident state does not recognize it.

[Pacun]

"It doesn't matter if AZ accepts the marriage, the feds do. So for all federal purposes, the couple is married even if their resident state does not recognize it."

Federal accepts any marriage that doesn't violate any local law. So, technically we should be careful.

[BulldogTom]

I've used Lion's method when the clients already exist in my system; for example in CA there would already be an MFJ return for state filing, so I change the column A numbers to match the 'taxpayer' return after 'amending' the return I've already used as the proforma for the CA filing.

The IRS FAQs for same-sex couples are here: http://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples

It doesn't matter if AZ accepts the marriage, the feds do. So for all federal purposes, the couple is married even if their resident state does not recognize it.

Just finished Spidell Tax Update Seminar today, and what Joan says is what they told me today. If you want to pick and choose your years, go ahead. They called it an IRS gift. They also described the method of amending exactly as Lion outlined. However, they did say to attach both original returns to the amended return. Also indicate that the amendment is being done per revenue ruling 2013-17.

They also had some info on a form I never heard of before, 8958, to allocate income between individuals in a community property state. I will be checking on that form for my clients that want to go MFS.

Tom

Hollister, CA

[joanmcq]

The 8958 came out in 2012. Brand new form, so don't worry that you haven't heard of it.

[Mr. Pencil]

8958, to allocate income between individuals in a community property state.

New last year. It's fairly obvious, with columns for total income and allocations to each partner. Brief but helpful instructions for making the splits. There used to be a worksheet in Pub 555, plus better instructions, but I've always done it on blank paper for more detail.

The rest of the country can generally still use the T/S comparison in your software, unless one or both of the partners is a resident of a community property state. But still take a look; you might find it useful dividing up payments from a joint account or something.

[bertrans]

Hi AppleFlag & welcome to the board. I do a ton of these returns in my practice. Oddly enough, you can pick and choose which years to amend based on whether it's advantageous to your clients or not. Don't forget to look at spousal health care benefits that may have been taxed in the past. One thing though; if you amend for any benefit of marriage (like removing imputed income from health insurance) you have to amend to married for all. In other words, you can't pick & choose within a year, amending to remove the health insurance income but not to MFJ or MFS.

What I do is enter the more complicated return, whoever will end up as 'taxpayer' on the joint return, hit 'amend' and then just add the spouse's income & deductions. You only need to file one amended return. I don't attach any of the originally filed copies, but do attach the forms & schedules that changed.

With the excvellent exception noted by Joan, the decision for a married couple to file jointly, in any given year, is an election, i.e., a choice.