During the IRS payroll industry telephone conference, Scott Mezistrano, IRS Industry Stakeholder Engagement, announced on 7 August 2014, that Illinois same-gender partners who elect to convert their Illinois civil unions to marriage will be deemed married according to the retroactive date applicable under Illinois law.
Illinois allowed same-gender couples to enter into a civil union effective 1 June 2011 (Public Act 096-1513). Effective 1 June 2014, same-gender couples were granted the lawful right to marry. Accordingly, civil union partners are given the choice to convert their civil unions to marriage, the date of such marriage recorded as the date of the original civil union (Public Act 098-0597).
Income tax refunds
Individuals who have converted their civil unions to marriage may have an opportunity to file for federal income tax refunds if the original date of the civil union was on or before 31 December 2013.
In contrast to federal law, Illinois provides that civil union partners may choose to file as “married filing jointly” or as “married filing separately” when preparing their Illinois Individual Income Tax forms. (Illinois Income Tax news.)
Subsequent to the Supreme Court decision in Windsor, the Treasury Department and the IRS ruled in Revenue Ruling 2013-17 that same-gender couples who are legally married in state and foreign jurisdictions recognizing same-gender marriages will be treated as married for US federal tax purposes.
The IRS issued Notice 2013-61 to provide guidance for employers and employees making claims for refund or adjustments of FICA taxes and income tax withholding resulting from Windsor and the holdings of the Revenue Ruling 2013-17. That guidance includes a special administrative procedure allowing employers to file one Form 941-X for each tax year (rather than one Form 941-X for each quarter, which is the normal rule).
FICA refunds may be claimed for all open years and quarters, currently (and pursuant to Illinois taxpayers affected by its law change), for periods beginning 1 June 2011.
Ernst & Young LLP insights
Upon enacting legislation to allow same-gender couples to marry, a few states with civil union provisions automatically converted those civil unions to marriage (e.g., Connecticut, effective 1 October 2010; Delaware, effective 1 July 2014; and New Hampshire, effective 1 January 2011).
Illinois’ provision is unique in that individuals must choose to convert their civil unions to marriage, and in doing so, the marriage date is retroactive to the original civil union date.
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