On August 29, 2013, the Internal Revenue Service ("IRS") issued Revenue Ruling 2013-17 (the "Revenue Ruling") providing guidance on the effect of the United States Supreme Court's (the "Supreme Court") decision in United States v. Windsor, 570 U.S. _____, 133 S. Ct. 26754 (2013). In Windsor, the Supreme Court struck down the portion of the Defense of Marriage Act ("DOMA") defining "marriage" as exclusively the union between a man and a woman and "spouse" as a person who is married to someone of the opposite sex.
Revenue Ruling 2013-17 provides much anticipated answers as to
how the Windsor decisions affects tax administration. For
Federal tax purposes, the terms "spouse," "husband
and wife," "husband," and "wife" now
include an individual married to a person of the same-sex and the
term "marriage" includes a marriage between individuals
of the same-sex, as long as the individuals are lawfully married
under any domestic or foreign law which authorizes the marriage of
two individuals of the same-sex, even if they are now domiciled in
a state that does not recognize the validity of same-sex marriage.
For example, a same-sex couple married in New York, but now
residing in New Jersey, will be considered married for Federal tax
purposes. However, the terms do not include individuals who have
entered into a registered domestic partnership, civil union, or
other similar form of relationship that is not denominated as a
marriage under domestic or foreign law.
The Revenue Ruling has broad implications for individuals and
employers. For example, individuals can file amended Forms1040 for
years in which the statute of limitations is still open (generally
three years from the date the return was filed or two years from
the date the tax was paid) and file claims for refunds on the
amount of taxes paid that the individual would not have paid had
his or her same-sex spouse been legally recognized for Federal tax
purposes. In the employment realm, this would include imputed
income to an employee for the value of coverage provided to the
employee's same-sex spouse, as well as the amount of health
coverage purchased under a cafeteria plan on an after-tax basis
(plus the amount of any excess social security taxes and Medicare
taxes paid as a result) for a same-sex spouse under an
employer's health plan.
Similarly, for all years in which the statute of limitations is
still open, an employer may claim refunds for any excess social
security and Medicare taxes paid that the employer would not have
paid had same-sex spouses been legally recognized. The IRS plans to
issue guidance in the future regarding the special administrative
procedure that an employer must follow in order to file claims for
refunds.
Furthermore, qualified retirement plans (e.g. §401(k) plans and pension plans) must comply with the Revenue Ruling as of September 16, 2013. This means that a plan must treat a same-sex spouse as a spouse for purposes of satisfying the federal tax laws relating to qualified retirement plans, including the consent requirements for distributions, death benefits, and qualified domestic relations orders. Although no plan amendments are required at this time, employers should review their plan operations and adjust their procedures to comply with the Revenue Ruling. The IRS intends to issue further guidance on the effect of qualified retirement plans, including the timing of any required plan amendments and corrections relating to plan operations prior to the date the guidance is issued. Please check back for any updates.
Originally published on the Employer's Law Blog
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