Guidance Issued on Federal Recognition of Same-Sex Marriages

Posted in: Employee Benefits

In June 2013, the Supreme Court ruled that a key provision of the federal Defense of Marriage Act (DOMA) was unconstitutional. The Court concluded that DOMA violates the guarantee of equal protection under the Due Process Clause of the Fifth Amendment and is contrary to the long-established precept that the definition and regulation of marriage is within the authority of each state. The Court’s ruling was limited only to those same-sex marriages lawfully preformed in a state. The Court did not decide whether there is a constitutional right to same-sex marriage.

IRS Recognition of Same-Sex Marriages
In Revenue Ruling 2013-17, the IRS reached the following conclusions for federal tax purposes:

  • the term “spouse” includes an individual married to a person of the same sex if the individuals are lawfully married under state law;
  • a marriage of same-sex individuals will be recognized if the marriage was entered into in a state that allows same-sex couples to marry, even if they reside in a state that does not allow or recognize the validity of same-sex marriages; and
  • the term “spouse” does not include an individual (whether same or opposite sex) who has entered into a registered domestic partnership, civil union, or other similar formal relationship that is not denominated as marriage under the laws of that state.

In the revenue ruling, the IRS indicated that recognizing marriage based on the state in which the ceremony was performed allows for uniformity, stability and efficiency in the administration of the Internal Revenue Code. The IRS acknowledged that recognizing marriage based on the state of residence would present serious administrative concerns and would raise significant challenges for employers that operate in multiple states and/or have employees residing in different states.

The effective date of the revenue ruling is September 16, 2013, so legally married couples generally must file their 2013 federal tax returns as married filing jointly or married filing separately. Affected taxpayers may rely on the revenue ruling for filing original returns, amended returns, adjusted returns or claims for credit or refund for any open tax years. This includes claims for credit or refund of an overpayment of employment taxes and income taxes with respect to imputed income for employer-provided health benefits or fringe benefits (i.e. the value of benefits provided to an employee’s same-sex spouse that was included in the taxable wages of the employee).

Filing a Claim for Refund
The IRS has issued optional simplified procedures that employers may use to correct overpayments of employment taxes for 2013 and prior years (resulting from imputed income). For 2013 overpayments, employers may either:

  •  Repay excess income tax and FICA tax withholdings to employees by December 31, 2013 and use the fourth quarter 2013 form Form 941 to correct overpayments for the first three quarters of 2013; or
  • Repay excess FICA tax withholdings to employees after December 31, 2013, obtain the required written statement, and file one Form 941-X for the fourth quarter to correct the overpayment of employment taxes for all quarters of 2013. Employers may not make an adjustment for overpayment of income tax withholding for a prior calendar year.

For open years prior to 2013, employers can make a claim or adjustment for all four quarters of a calendar year on one Form 941-X filed for the fourth quarter of such year. (Generally a separate Form 941-X must be filed for each quarter for which a refund claim or adjustment is made.) The usual requirements for correction of overpayments apply, including the filing of Forms W-2c, repaying or reimbursing employees for over withheld FICA taxes and obtaining required written statements from employees. Employers may not claim a refund or credit or an overpayment of income tax withholding if the tax was deducted and withheld from the employee. Employees may receive refunds of income taxes paid by amending their federal income tax returns. The Form W-2c will assist employees in claiming a refund of income tax.

DOL Recognition of Same-Sex Marriages
In Technical Release 2013-04, the DOL followed the lead of the IRS and stated that the term “spouse” as used in ERISA and DOL regulations will be read to refer to any individuals (including same-sex couples) who were lawfully married under any state law, even if the individuals reside in a state that does not recognize the marriage.

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