IRS recognizes same-sex marriages for federal tax purposes

In the wake of the U.S. Supreme Court ruling that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional in providing that marriage for purposes of federal law means one man and one woman, the IRS recently issued guidance on its new stance on same-sex spouses. According to IRS Notice 2013-17, for federal tax purposes, the terms “husband,” “wife,” “spouse,” and “marriage” apply equally to both same-sex and opposite-sex marriages that were performed in accordance with state law. This holds true even if the state in which the same-sex spouses currently reside does not recognize same-sex marriage, as long as they were married under the law of a state that does recognize same-sex marriage. The IRS emphasized that domestic partnerships, civil unions, and other similar formal relationships not termed a “marriage” will not be deemed marriages for federal tax purposes. What does this mean for employers? It means you no longer have to include the value of employer-sponsored health coverage provided to same-sex spouses in the employee’s income for federal tax purposes. The IRS also issued FAQs indicating that:

• Employers who included in the employee’s taxable wages the value of employer-sponsored coverage provided to the employee’s same-sex spouse can claim a refund for the Social Security and Medicare taxes paid on those benefits. The refund could go back three years from the date the return was filed, or two years from the date the tax was paid, whichever is later. A special administrative procedure for claiming a refund under this circumstance will be provided in future IRS guidance.
• Employees may make their own refund request to the IRS for income taxes they paid on the value of coverage provided to their same-sex spouses.
• As of September 16, 2013, qualified retirement plans must treat same-sex spouses the same as opposite-sex spouses for purpose of all federal tax laws that relate to retirement plans.

Questions? Contact your Vigilant staff representative or your tax adviser. To learn more about how you can benefit from flat fee counsel with Vigilant on this issue and more, contact us.