Gay and lesbian married couples may want to file a protective claim for their year 2009 federal tax return in order to preserve their right to receive a refund from the IRS. Normally, taxpayers have three years from the original due date of the tax return to request a refund from the IRS under the statute of limitations for refunds. That three-year deadline is April 15, 2013, for the year 2009. Gay couples who were legally married for the year 2009 would have filed their federal return using a filing status for unmarried persons (such as single or head of household), as the IRS does not recognize same-sex marriages for federal tax purposes under the Defense of Marriage Act (DOMA). Currently, however, there are two cases before the Supreme Court challenging the constitutionality of DOMA. If DOMA is ruled to be unconstitutional, gay couples would become eligible to file their return using a filing status for married persons (such as married filing jointly or married filing separately).
For some gay couples, changing their tax returns from single to married status would result in a refund. However, refunds from the year 2009 will expire in April 2013. But the Supreme Court is not expected to render its decision in the two DOMA-related cases until the summer, which is beyond the April 2013 deadline for refunds from the year 2009. In this circumstance, gay couples can protect their refunds by filing a protective claim will keep the statute of limitations open for the year 2009. Essentially, the protective claim puts the IRS on notice that an additional refund for 2009 is expected if the Supreme Court rules that DOMA is unconstitutional. A protective claim protects the ability of taxpayers to receive a refund from a year that would otherwise be barred from refunds due to the statute of limitations.
Not all gay couples will experience a reduction in federal tax if they were allowed to filed as married. For some, their federal tax will increase; and for others the tax would be the same. Couples who would receive a refund from the year 2009 if they were to file as married should file a protective claim.
Gay couples may already have a federal return using the married filing jointly status. That's because gay couples may have filed their state return jointly and included a pro-forma federal return. The pro-forma federal return would show their combined income and deductions and tax calculations as if they were married for federal tax purposes. Gay couples should compare that pro-forma federal return to their two separate federal tax returns to determine whether the couple would owe extra dollars or receive additional refunds.
A protective claim "would be a Form 1040X to reserve the right to amend return," says Nanette Lee Miller, CPA. But unlike other types of amended returns, the right to a refund for gay couples is contingent on what the Supreme Court decides. Accordingly, gay couples would have a "statement put in the return that they are waiting to see what the Supreme Court rules," says Miller.
The Form 1040X would include a new Form 1040 using one of the married filing status, and recalculate the couple's income, deductions, and tax.
The IRS will not process the amended return until after the Supreme Court issues their decision in the two cases. "Their claim would be held until the matter is finalized in the courts," writes Lori Shrout, EA. It is recommended to mail in a protective claim using certified mail with return receipt requested. This is helpful for proving that the protective claim was filed before the April 15, 2013, deadline.
Nanette Lee Miller, CPA, recommends that gay married couples wait until October to file their 2012 tax return. In this way couples will be able to decide on the best filing status for them. Miller also recommends that amended returns for the years 2010 and 2011 can wait until after the Supreme Court cases are decided, as the statute of limitations will expire until April 15, 2014 and 2015, respectively, for those years.
The IRS discusses protective claims in Publication 556:
"Protective claim for refund. If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. A protective claim can be either a formal claim or an amended return for credit or refund. Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. A protective claim preserves your right to claim a refund when the contingency is resolved. A protective claim does not have to state a particular dollar amount or demand an immediate refund. However, to be valid, a protective claim must:
- "Be in writing and be signed,
- "Include your name, address, social security number or individual taxpayer identification number, and other contact information,
- "Identify and describe the contingencies affecting the claim,
- "Clearly alert the IRS to the essential nature of the claim, and
- "Identify the specific year(s) for which a refund is sought.
"Generally, the IRS will delay action on the protective claim until the contingency is resolved. Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim.
Protective claims can be filed for estate taxes and gift taxes as well, not just for income taxes.
- Lori Shrout, Same-Sex Couples Should File Protective Refund Claims (Accounting Today).
- Stephen Fishman, Gay Couples: Is It Time to File Protective Tax Refund Claims? (Nolo.com).
- Ann Carnns, Gay Couples May Want to File a Protective Tax Refund Claim (New York Times).
- Amy Kinkaid, Advising Clients Amid Constitutional Challenges to the Defense of Marriage Act (The Tax Adviser).
- Kathy Belge, Supreme Court and Gay Marriage: What's at Stake? (About.com)