IRS Change for Filing Federal Individual Returns for Same-Sex Couples

The IRS announced on August 29, 2013 that all legal same-sex married couples will be treated as married for Federal tax purposes (including income and gift and estate taxes) as of September 16, 2013.

The ruling contained in IRS Revenue Ruling 2013-17 implements the Federal tax aspects of the June 26, 2013 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

The new rule applies to legally married same sex couples regardless of whether they reside in a State that recognizes same-sex marriage or in a State that does not recognize the validity of same-sex marriages.

It does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.

For 2013 and beyond, same sex married couples must file their individual Federal return using either a filing status of married filing jointly or married filing separately. For 2012, this applies only if their original return for 2012 was filed on or after September 16, 2013. If the 2012 return was filed before September 16, 2013, they may choose (but are not required) to amend their 2012 Federal return.

This ruling is also retroactive to any prior open tax years if they were legally married during those years. As a result, they may file an amended return for Tax Years 2010, 2011, or 2012.

This ruling does not affect how a State individual return is filed if the State does not recognize the validity of same-sex marriages. We will continue to provide updates as more information on what filing status is available to same-sex married couples for State individual returns is released.

For more information see the following on the IRS website:

• IRS Announcement of August 29, 2013
• IRS Revenue Ruling 2013-17
• FAQs for Same-Sex Couples
• FAQs for Registered Domestic Partners and Individuals in Civil Unions

2013 Federal Tax Changes to Be Aware Of

Itemized Medical Expense Deduction Threshold Percentage Change
As part of the Affordable Care Act, the threshold percentage for when medical expenses are included as an itemized deduction on Schedule A was changed to:

• Taxpayers under 65: 10%
• Taxpayers 65 and older: 7.5%

Basic Changes
Business Mileage Rate for 2013: 56.5 cents per mile

Bonus Depreciation: 50% rate still applies

Capital Gains/Dividends Tax Rate:

• 0% for taxpayers in 10% or 15% tax brackets
• 15% for taxpayers in 25%, 28%, 33%, or 35% tax brackets
• New 20% rate for taxpayers in new 39.6% tax bracket

Standard Deduction

• Single: $6,100
• Married Filing Jointly: $12,200

For a complete listing of the basic yearly changes for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

New Provisions Affecting Higher Income Individuals
Individual Income Tax Rates

• Added new 39.6% rate when the AGI reaches:
• $400,000 - Single
• $450,000 - Married Filing Joint
• $425,000 - Head of Household
• $225,000 - Married Filing Separate
• The 10%, 15%, 25%, 28%, 33%, and 35% brackets were made permanent

Phase-Out of Itemized Deductions and Personal Exemptions
Beginning in 2013, the taxpayer's itemized deductions and personal exemptions will begin to be reduced when their adjusted gross income (AGI) reaches the following threshold amounts:

• $250,000 - Single
• $300,00 - Married Filing Jointly
• $275,000 - Head of Household
• $150,000 - Married Filing Separately

The reduction in Itemized Deductions will be calculated as the lesser of:

• 3% of the amount over the taxpayer's threshold amount; or
• 80% of the total itemized deductions

Personal exemptions will be reduced by 2% for each $2,500 (or fraction thereof) by which the taxpayer's AGI exceeds the applicable threshold amount.

For a complete listing of what Federal provisions have changed or what extender provisions are still in effect for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

IRS Update: New IRS Tool for Offers in Compromise

In an effort to help taxpayers that have an outstanding tax debt determine whether they may be eligible for an offer in compromise, the IRS has added a new Offer in Compromise Pre-Qualifier tool to their website. Read more

By adding this tool, the IRS believes that taxpayers and tax practitioners will save time by doing the work in advance of filing their return to determine if an offer in compromise is worth pursuing. This is important because an offer is generally not accepted if the IRS believes the tax liability can be paid in full as a lump sum or through a payment agreement. Read more

Click here to read the entire CrossLink Tax Update about the new IRS tool for Offers in Compromise.