State of Michigan Filing Requirements and Refund Opportunities for Same-Sex Couples
Submitted by Brett Karhoff, CPA, MST, Senior Tax Manager
Hungerford Nichols CPAs + Advisors
The State of Michigan recently provided income tax filing guidance and potential refund opportunities for same-sex couples, in response to the June 26, 2015 Supreme Court ruling (Obergefell et al v Hodges) that invalidated the Michigan Constitution’s definition of marriage. The historical ruling held that the State’s definition of marriage as a union of one man and one woman denied same-sex couples the benefits of marriage and therefore denied them equal protection of the law under the 14th amendment of the United States Constitution. To comply with the ruling, the State of Michigan now recognizes the marriages of same-sex spouses.
Michigan Income Tax – Filing Status
The following questions and answers should help you determine how to handle your income tax filing responsibilities with your same-sex spouse:
- What filing status do we use if we were married during 2015?
As a general rule, your income tax filing status is determined as of December 31 each year. Consequently, marriages of same-sex (or opposite-sex) couples occurring on any date in 2015 will require you to file your federal return as either “Married Filing Jointly” or “Married Filing Separately”.
The State of Michigan has indicated that if both spouses file a joint federal return, then they must also file a joint Michigan return. However, if the spouses choose to file using the “Married Filing Separately” status for federal purposes, they can choose if they want to file their Michigan returns separately or jointly.
- We were married prior to 2015 in another state, at a time when Michigan did not recognize same-sex marriages. Our 2014 tax return is currently on extension until October 15, 2015 and we have not filed yet. What filing status should we use?
As of the date of the Supreme Court’s decision (i.e. June 26, 2015), same-sex spouses who file Michigan income tax returns and who are married under the laws of Michigan or under the laws of another state, must claim either “Married Filing Jointly” or “Married Filing Separately” status on the Michigan income tax return.
The State of Michigan has indicated that if both spouses file a joint federal return, then they must also file a joint Michigan return. However, if the spouses choose to file using the “Married Filing Separately” status for federal purposes, they can choose if they want to file their Michigan returns separately or jointly.
In this instance, since the return will be filed after June 26, 2015, same-sex couples that have not filed their 2014 Michigan income tax returns will be considered married for both federal and state purposes.
- We were married prior to 2015 in another state, at a time when Michigan did not recognize same-sex marriages. While we filed “Married Filing Jointly” or “Married Filing Separately” on our federal returns, we were required as Michigan residents to file our Michigan income tax returns as if we were “Single”. Do we have to amend our returns?
The guidance provided by the State of Michigan indicates that income tax returns may be amended to claim the appropriate married status, if the same-sex spouses choose to do so, but the Department will not require amended returns.
If an amended return is filed, refunds will only be issued if the return is filed within 4 years of the date that the original return was due.
Refund Opportunity – Employer Provided Health Care Coverage
Prior to the recognition of same-sex marriage in Michigan, the value of the employer’s share of employer-provided health care coverage for a same-sex spouse was included in the employee’s Michigan taxable income. Additionally, pre-tax dollars used to pay the employee’s share of health premiums for a same-sex spouse were also added to the employee’s Michigan taxable income. Similarly, pre-tax dollars used to fund flexible spending accounts (FSA) for the benefit of a same-sex spouse and dependents of that spouse were added to the employee’s Michigan taxable income.
Recognition of same-sex marriage will now exempt certain employee benefits for a same-sex spouse from taxation under the Michigan Income Tax Act. The exemption from taxation, however, does not apply to domestic partnerships or other relationships that do not constitute state-sanctioned marriage.
For tax years before 2015, an employee who was married to a same-sex spouse may seek a refund by filing an amended Michigan income tax return to deduct the value of any same-sex spousal benefits that had been included in Michigan taxable income for that tax year. For taxpayers with same-sex spousal benefits who only had Michigan wages, the value of those benefits will be the difference between the amount in Box 1 and Box 16 of your federal form W-2.
If an amended return is filed, it must be filed within 4 years of the date the original return was due. The amended returns must show an appropriate married status of either “married filing jointly” or “married filing separately”.
Employers – 2015 Withholding Adjustments and Guidance
If an employee is married to a same-sex spouse at any time during 2015, employers should not withhold Michigan income tax from the employee’s wages to cover the value of employee benefits for the spouse. If, during 2015, an employer has been withholding Michigan tax on the value of the benefits, the employer should reduce withholding on the employee’s wages for the rest of the year to correct any overwithholding. If a reduction in withholding does not correct the full amount of overwithholding, the employee may receive a refund of the overpaid withholding through the filing of their 2015 Michigan income tax return.
Brett Karhoff, CPA, MST is a Senior Tax Manager at Hungerford Nichols CPAs + Advisors. He works closely with his clients to understand their concerns and their business and to provide timely and proactive ideas to help them be successful. Hungerford Nichols is a Tax, Auditing and Business Advisory firm with offices in Grand Rapids and Greenville, MI. The firm is celebrating 74 years of helping closely-held and family-owned businesses in West Michigan.
For additional information, contact Brett Karhoff:
Brett Karhoff, CPA, MST, Senior Tax Manager
Phone: (616) 949-3200 ext. 104
Email: bkarhoff@hungerford.com
