Tax & Accounting Blog

Using Data Mining in UltraTax CS to Identify New Tax Opportunities for Clients in Same-Sex Marriages

CS Tax & Asset Management Solutions September 19, 2013

As you can read in Tax Implications of the Supreme Court’s Decision Holding DOMA Unconstitutional, a free analysis from Thomson Reuters Checkpoint®, the Supreme Court recently overturned a key provision in the 1996 Defense of Marriage Act (DOMA). This ruling opens the door to federal tax savings for couples married in states that recognize same-sex marriages, including any such couples who may now be domiciled in a different state. 

Couples in a legally-recognized same-sex marriage can now file federal individual tax returns jointly to take advantage of various marriage-favoring individual tax provisions, such as:

  • The higher standard deduction
  • Combined exemptions
  • Exclusion of certain employee benefits from income
  • Capital losses from one spouse which could offset the other spouse’s gains

New advantages for same-sex married couples for estate planning purposes include:

  • The marital deduction allowing unlimited transfers between spouses while living
  • A marital deduction for amounts transferred to the surviving spouse, as well as a transfer of the unused exclusion amount
  • Gift-splitting

On August 29, 2013, the IRS released official guidance concerning the options available to same-sex couples, which are detailed in IR-2013-72 and Revenue Ruling 2013-17. The rulings issue guidelines not only for the current tax year and beyond, but also address options for amending prior tax returns for same-sex filers entitled to refunds when filing jointly. 

That means now is the time to determine which of your clients could benefit from the ruling, and to consider filing amended returns for prior years – assuming it leads to a more favorable tax position for the taxpayers. 

Firms can also immediately begin implementing new tax planning strategies for couples in same-sex marriages, particularly since some couples may actually face higher tax liabilities as a result of the “marriage penalty.” Adjustments to withholding may also be necessary in the event of two wage earners intending to file jointly for tax year 2013, as these taxpayers may face an unexpected balance due if their W-4s are left unadjusted. 

To determine which clients you may want to contact now about these tax planning opportunities, tax preparers using UltraTax CS to prepare returns for states which recognize same-sex joint filings can use Data Mining to compile an initial contact list of clients likely to benefit from the ruling. 

NOTE:  Currently, UltraTax CS supports domestic partnership, state-only marriage, and/or civil union filings for California, Connecticut, the District of Columbia, Delaware, Hawaii, Illinois, Iowa, Massachusetts, New Hampshire, New Jersey, New York, Oregon, and Vermont. However, the IRS only intends to recognize couples in same-sexmarriagesas eligible for Federal joint filing; per IR-2013-72, “the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.” 

To compile your contact list, choose Utilities > Data Mining in UltraTax CS. 


  • The search described below will not produce an all-inclusive list, since it will include clients who may have filed state returns under domestic partner or civil union provisions but who werenotlegally married. In addition, you may have clients who entered into a same-sex marriage in one state, but now reside in another which does not recognize same-sex state filings. However, the list can serve as a starting point in canvassing your clientele. 
  • You may want to repeat this process in multiple prior years of UltraTax CS to identify all prior-year amendment opportunities. 

From Utilities > Data Mining, perform the following steps: 

  1. Select the 1040 Individual database and click Continue.
  2. In the Print selection field at the top of Step 2, select the CS Contact Information report. Although you can select any variety of report at this step, the CS Contact Information report is the most useful for the staff members making the calls.
  3. In the Client search/focus drop-down list below, select Merged Clients – Domestic Partner.
  4. Click Continue (Step 3)at the bottom.
  5. Now you can choose to Preview or Print your list.

    NOTE: If you specify a Letter selection in Step 2 above (you could create a new custom letter for this purpose), you can also use Data Mining to generate a letter addressed to each client in the report, or even e-mail it as a PDF attachment to any clients for whom you have an e-mail address on file. To e-mail the letter, check the option E-mail client letters as PDF attachments, if email address is available at the top of Step 3. Be sure to exclude any clients from the mailing who filed joint state returns under domestic partnership or civil union provisions but who were not legally married.

For more information, visit the help topic Data Mining overview

If you’d like to provide a recalculated W-4 for withholding purposes for certain clients, both UltraTax CS and Planner CS feature W-4 calculators that you can use for this purpose. 

To truly recalculate the required withholdings for tax year 2013, you’ll need both spouses’ most recent pay stubs.

In UltraTax CS 

  1. With a 1040 client’s return open, select the Other folder in the folders block, then click the W4 tab at the top.
  2. Enter your data, including information from each spouse’s pay stub (such as pay period, number of pay periods remaining in 2013, 2013 withholding to date, etc.).

    NOTE: Generally, a best practice for married couples to prevent underpayment scenarios is to leave the Allowances as “0” in the columns for Lower Wage Employers. However, for those same-sex married taxpayers changing withholding statuses mid-year, it may be appropriate to retain existing allowances for the lower wage employers.

  3. Be sure to complete all fields marked with an asterisk (*) if you intend to also produce the Tax Projection Worksheet and wish to use the refigured withholding amount on it.
  4. Select the Review folder and the TPW tab. Make any adjustments required to calculate the tax projection for a married filing joint filing status.
  5. Select the TPW-2 tab and select code 2 (W-4 Withholding Worksheet) in the Calculated income tax w/h  field.
  6. Switch to Form view to view the Federal Tax Projection Worksheet, P2  and confirm that the calculated withholding on line 70 is appropriate. Adjustments can be made on screen W4, using
    Total number of allowances (Force)  or Additional withholding amounts (Force) to fine-tune the withholding.
  7. To view the newly calculated Form W-4, switch to Form view. To print it, choose Print Current Page  from the File menu (or click the Print button on the toolbar).

For more information, see the Screen W4 – Employee Withholding Allowance Certificate (1040) help topic.

In Planner CS 

  1. Create a comprehensive tax plan for tax year 2013 for a same-sex couple who will be filing joint or married filing separate, and determine their ultimate Federal tax liability. To create the plan, either:
    1. Export 2012 tax return data to Planner CS to use as a baseline from UltraTax CS or GoSystem Tax RS, or
    2. Open an existing plan via File > Open in Planner CS and add tax year 2013, or create a new one using File > New.
  2. Choose Tools > W-4 Calculator.
  3. Select the Alternative you’d like to use from the drop-down list, select tax year 2013, then click OK.
  4. In the W-4 Calculator dialog, complete the information using the taxpayers’ most recent pay stubs, then click OK.

    NOTE: Generally a best practice for married couples to prevent underpayment scenarios is to leave the Allowances as “0” in the columns for Lower Wage Employers; however, for those same-sex married taxpayers changing withholding statuses mid-year, it may be appropriate to retain existing allowances for the lower wage employers.

  5. Either choose to print the newly-calculated Forms W-4 before closing the W-4 Calculator dialog, or you can choose File > Print Forms  to print or preview each form later.

For more information, see the following help topics: