IRS Confirms Same-Sex
Marriages Will Be Recognized for Federal Tax Purposes
IRS has issued guidance
(Revenue Ruling 2013-17) confirming that same-sex couples will be considered
married for federal tax purposes if they are married in a state or foreign
country that recognizes same-sex marriages, regardless of where the couple resides.
In addition, IRS has released Frequently Asked Questions related to this
guidance for same-sex spouses and group health plan sponsors.
The
guidance follows the Supreme Court's decision inUnited States v. Windsor that
declared as unconstitutional Section 3 of the Defense of Marriage Act, which
previously prevented the federal government from recognizing same-sex marriage.
According
to the Revenue Ruling, which is generally effective September 16, 2013, but has
some retroactive effects, group health plan sponsors must begin to treat all
individuals in same-sex marriages as married for federal tax purposes. In
response, plan sponsors are advised to take the following steps:
- Stop imputing
income for the value of employer-paid health care coverage provided to an
employee's same-sex spouse;
- Allow pre-tax
contributions through a cafeteria plan for an employee's share of the cost
of group health coverage provided to his or her same-sex spouse;
- Make
adjustments for income tax withholding that was over-withheld from an
affected employee during the current year;
- File an amended
payroll tax return to claim a refund of federal payroll taxes paid on
previously imputed income and on after-tax employee contributions for all
open years (the IRS intends to issue streamlined procedures for employers
claiming refunds);
- Allow
reimbursements of qualifying medical expenses of an employee's same-sex
spouse (and spouse's children) from Health FSAs and HRAs; and
- Allow
reimbursements of qualifying dependent care assistance expenses for an
employee's disabled, same-sex spouse under a Dependent Care Assistance
Plan ("DCAP").
Individuals
may file amended tax returns based on this ruling for all open tax years.
The
guidance does not address whether IRS's recognition of same-sex marriages is
considered a change of status event under Section 125 of the Internal Revenue
Code that would allow an employee to change his or her election mid-year to:
(i) enroll a spouse in an employer-sponsored health and welfare plan or change
benefit options, or (ii) increase Health FSA or DCAP contributions. IRS,
however, has indicated that it will issue additional guidance on the
retroactive application of the Windsor decision to employee
benefit plans and arrangements.
Revenue
Ruling 2013-17 is available at:http://www.irs.gov/pub/irs-drop/rr-13-17.pdf,
and the IRS FAQs regarding same-sex marriages are available at:http://www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples.
IRS
Notice Provides Procedures to Correct Overwithholdings and Overpayments Related
to Same-Sex Spousal Benefits
The IRS
has issued Notice 2013-61, which outlines special administrative procedures for
employers to use to correct overwithholdings of income taxes and overpayments
of payroll taxes for 2013 and prior open tax years with respect to
employer-provided, same-sex spousal benefits. This guidance supplements
Revenue Ruling 2013-17, which clarified that under the Supreme Court's decision
in Windsor, the IRS will recognize all legally-married,
same-sex couples for federal tax purposes, regardless of where the couple
lives.
Correction
Methods for 2013. Notice 2013-61 offers the following
alternatives for employers that have treated the value of same-sex spousal
benefits as compensation on their Forms 941 for the first three quarters of
2013:
- Employers may
correct overwithholding and overpayments for the first three quarters of
2013 on the fourth quarter's Forms 941 if employees are reimbursed for
overwithholdings and overpayments by December 31, 2013.
- Employers that
do not reimburse employees for the overwithholdings and overpayments by
December 31, 2013 may file one Form 941-X for the fourth quarter of 2013
to correct FICA overpayments for all quarters in 2013. This
alternative allows employers to avoid having to file separate Forms 941-X
for each quarter of 2013.
Under
the second alternative, however, employers cannot make an adjustment for income
tax overwithholding. Instead, employees will receive a credit for the
overwithholding when they file their 2013 federal income tax returns.
Correction
Methods for Prior Years
2010
through 2012
For
calendar years 2010 through 2012, Notice 2013-61 authorizes employers to file a
single Form 941-X for the fourth quarter of the applicable year to correct for
FICA overpayments made in any or all quarters of that year.
While
Notice 2013-61 allows employers to file only one Form 941-X to correct
overpayments, it does not relieve employers of their obligation to file Forms
W-2c (to allow employees to correct their prior income tax returns), obtain
written consent from affected employees, and reimburse employees for FICA
overpayments.
Procedural
Issues. The special administrative procedures provided in Notice
2013-61 are optional and are intended to relieve filing and reporting burdens
associated with the retroactive application of Revenue Ruling 2013-17.
Employers may still use standard procedures for correcting income tax
overwithholding and FICA overpayments.
All
Forms 941 and Forms 941-X filed pursuant to Notice 2013-61 must include the
name "WINDSOR" in dark, bold letters across the top of page one to
alert the IRS that the forms are related to adjustments in response to Revenue
Ruling 2013-17.
Recommendations. In
consideration of the guidance provided by Notice 2013-61, employers are advised
to determine any income taxes that were overwithheld in 2013 and make the
necessary corrections on the fourth quarter 2013 Form 941. Employers
should also consider whether it would be more advantageous to simply file
refund claims for prior years or to take a credit.
IRS
Notice 2013-61 is accessible at:http://www.irs.gov/pub/irs-drop/n-13-61.pdf.
DOL
Guidance Confirms FMLA Leave Available to Same-Sex Spouses in States
Recognizing Same-Sex Marriage
The DOL
has issued guidance on the application of the Family and Medical Leave Act
("FMLA") to same-sex spouses. In particular, the guidance
provides that employees in same-sex marriages are eligible to take FMLA leave
to care for their spouses only if they reside in a state that recognizes
same-sex marriage.
Among
other things, FMLA entitles eligible employees to 12 weeks' leave to care for a
seriously ill or injured spouse or to deal with "exigencies"
related to their spouse'smilitary deployment. It also provides employees
with up to 26 weeks' leave to care for a spouse who has a military service
related illness or injury.
DOL's guidance
comes in the wake of the Supreme Court's decision this past June in Windsor,
which struck down the provision in the Defense of Marriage Act (DOMA) limiting
the definition of "marriage" and "spouse" under federal
laws to heterosexual marriages.
Current
FMLA regulations say the term "spouse" only includes a spouse if the
marriage is recognized under the laws of the state in which the employee
resides. However, while DOMA was in effect, the federal government would
not recognize same-sex spouses.
DOL
says the Supreme Court's decision means that married same-sex couples residing
in states where same-sex marriage is recognized must now be afforded spousal
FMLA rights. On the other hand, employers are not required to make FMLA
leave available to same-sex spouses who reside in a state that does not
recognize same-sex marriage.
DOL
Secretary Tom Perez recently commented that this guidance is "one of many
steps" the agency will take to implement the Supreme Court's decision
in Windsor, leaving open the possibility that current regulations
will be changed to give all same-sex marriages FMLA rights, regardless of the
state of residence.
