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Sen. Elizabeth Warren proposes law to allow same-sex couples to get tax refunds owed to them

Key Points
  • The Refund Equality Act, reintroduced by Sen. Elizabeth Warren (D-Mass.) would permit gay couples whose marriage precedes a  2013 decision to file amended federal returns back to when they were first married.
  • Filing amended returns may not always be a good call for everyone: Dual-income households could be on the hook for higher taxes due to the marriage penalty.
Senator and presidential candidate Elizabeth Warren
Barry Chin | Boston Globe | Getty Images

Sen. Elizabeth Warren (D-Mass.) reintroduced a bill that would allow married same-sex couples to file joint amended federal tax returns and collect refunds for as long as they have been married.

In a key 2013 case, U.S. v. Windsor, the U.S. Supreme Court ruled that section three of the Defense of Marriage Act was unconstitutional, barring the federal government from failing to recognize gay and lesbian couples who were legally married.

The decision granted same-sex spouses a bevy of federal rights, including the ability to claim spousal Social Security benefits and the ability to file a joint income tax return.

Up until then, couples who were legally married in their state had to file as "single" on their federal tax return.

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Following the Court's decision, the IRS allowed these couples to file as married from 2013 onward, and said they could amend tax returns to get credits and refunds they could have otherwise received.

Under current law, you can file an amended return for up to three years from when you originally filed. You also have up to three years from when you filed to claim a refund owed.

Warren's proposed legislation, the Refund Equality Act of 2019, would permit these couples to file amended federal returns and claim refunds owed for all the years they were legally married.

She had first pitched the legislation in 2017.

"The federal government forced legally married same-sex couples in Massachusetts to file as individuals and pay more in taxes for almost a decade," Warren said in a statement.

Rep. Judy Chu (D-Calif.) proposed a similar law in the House Committee on Ways and Means earlier this month.

Larger brackets

Married couples have access to higher standard deductions: $24,400 for joint filers in 2019, compared to $12,200 for singles.

In addition, joint-filers enjoy wider income tax brackets compared to singles. See below.

Penalty or bonus

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Whether it makes sense for a couple to file an amended return depends on whether they're subject to a marriage penalty or a bonus.

Talk to your tax preparer or accountant before proceeding.

Two spouses with similar incomes who marry could wind up with more of their taxable income in a higher tax bracket. The effect is magnified if both spouses are high earners.

This is known as the "marriage penalty."

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However, some couples may end up with a marriage bonus. In this case, one spouse is either unemployed or doesn't earn much money, while the other is a high-income earner.

As a result, the tax bill is lower for the couple than it would have been if the high earner had filed on his or her own.

"If I have a stay-at-home spouse, I can reduce my rate because he's earning less than me," said Scott Squillace, an estate planning attorney and founder of Squillace & Associates in Boston.

"But most couples are both working, and therefore they would have the marriage penalty and not the bonus."