IRS Provides Special Procedures for Adjusting Employment Taxes for Same-Sex Spouses

The Internal Revenue Service (IRS) has recently released Notice 2013-61, which provides optional administrative procedures that employers can use to correct overpayments of Federal Insurance Contribution Act (FICA) taxes for 2013 and prior years on a simplified basis. The employment tax overpayments result from the Supreme Court’s decision in United States v. Windsor, and subsequent IRS rulings, which provide that legally married same-sex couples will be treated as married for federal tax purposes regardless of which state they presently reside.

Prior to Windsor, employees who purchased same-sex spouse health insurance coverage from their employers had to do so on an after tax basis. As a result, payroll taxes were paid in on such amount. Now, such health care coverage is excluded from income and is not subject to employer and employee payroll taxes under FICA. Prior IRS rulings allowed married couples to file amended tax returns to refund the taxes paid on employee contributions to this insurance coverage. Under Notice 2013-61, the IRS has provided guidance as to how employers can correct the overpayments of employment taxes for 2013 and open tax years, which include 2010, 2011 and 2012. The procedures allow for an annual correction, rather than per quarter.

Employers that had employees who purchased same-sex spouse health insurance coverage during these time periods should review the procedures for claiming overpayments which are set forth in the Notice and can be accessed at: http://www.irs.gov/pub/irs-drop/n-13-61.pdf.

Should you have any questions about how this withholding rule affects you as an individual or business, please contact your Marcum Tax Professional.