The Internal Revenue Service has addressed a number of the questions regarding same sex marriage recently raised by the Supreme Court. The Supreme Court held that the Defense Of Marriage Act (DOMA), which restricted marriage, for federal purposes, only to heterosexual unions was declared unconstitutional. IRS Revenue Ruling 2013-17 is the first formal response.
What is the IRS definition of marriage?
Includes any marriage between two individuals provided the couple is lawfully married under state law; Includes a same sex marriage sanctioned under the state law in which it was performed even is the couple lives in a state that does not recognize same sex marriage; Any couple (same sex or opposite sex) is not considered married under a registered domestic partnership, civil union or other formal relationship recognized under state law but not classified as a marriage.
What is the impact for same sex couples?
Look about amending tax years 2010, 2011, 2012 to take advantage of married filed joint status. Besides the marriage bonus on tax rates, other considerations may include personal and dependency exemptions, itemized deductions, IRA contributions, child tax credits, exclusion of gain from sale of principal residence.
Also look at amending because of how health coverage was treated for same sex couples. In the past, the value of health care coverage provided to a same-sex partner of an employee was treated as additional income (wages) on Form W-2 by the employer. The employee may file an amended 1040 for the open tax years (2010, 2011, 2012) to claim a refund of the income taxes paid on the value of the health care benefits included in income (wages).
What about impact on employers?
As of September 16, 2013, employers must treat same-sex spouses the same as opposite-sex spouse for all employee benefit plans. This would include health care plans, qualified retirement plans, cafeteria plans. Work with your plan administrator to ensure that the plans have the proper rules and related documentation in place.
Employers should immediately stop imputing income and taxes on certain benefits provided to spouses of same sex couples! (That is, stop treating these benefits as wages). These certain benefits are the value of health care coverage provided to a same-sex partner of an employee as described above.
For 2013, employers should make adjustments of income and taxes to the employee with these certain benefits before the end of the year so that the employee W-2 with the same sex spouse is correct.
Employers should seek refunds of any Social Security and Medicare taxes paid for these certain benefits for prior years. See the instructions for Form 941-X for details. The IRS will also provide future guidance for a streamlined administrative procedure for employers to file claims for social security taxes and Medicare taxes paid on same sex spouse benefits.
Note that Employers are not permitted to make claims for refunds of overwithheld income tax for prior years.
Most of the followers of Kasperek & Co. Accountants are small businesses and individuals and this very brief overall is meant to address their broad immediate concerns. More to come!
If you have any questions regarding the IRS guidelines of same sex marriage, feel free to contact Kasperek & Co. Accountants. John J. Kasperek, EA, the author, or other able staff members can help.
John J. Kasperek, EA, the author, has ran his own practice for over 25 years and enjoys passing on his expertise to the public.