After the U.S. Supreme Court’s decision on the Defense of Marriage Act, there was a lot of discussion in the benefits community about when official guidance might be issued regarding the impact of the decision on federal tax issues. Last week the Internal Revenue Service issued Revenue Ruling 2013-17, which confirms that they will consider a same-sex couple married for federal tax purposes if they were married in a state or foreign country that recognizes same-sex marriage regardless of where the couple resides. Thus, the IRS will not restrict the recognition of same-sex marriages to the state of “domicile,” but instead considers marriages valid even if the couple now resides in a state that does not have same-sex marriage.
This new guidance goes into effect on September 16, 2013, but it also gives taxpayers the right to file amended returns for “open” tax years. So, if an employee was not allowed to pay for his/her same-sex spouse’s coverage on a pre-tax basis in past years, the employee may file an amended return to have those payments regarded as pre-tax salary reductions. To assist in explaining this, the IRS also issued FAQs explaining how individuals in same-sex marriages should file their tax returns going forward and when they may be entitled to a refund. The FAQs also provides some explanation for instances where and employer may also request a refund for Social Security and Medicare taxes paid on benefits. The IRS does not, however, specifically recognize “civil unions.”
This ruling clearly does not address all state taxation concerns on this matter and each individual state may issue its own guidance on taxation of same-sex marriages. Also, there may be additional guidance from the IRS in the coming month. However, for the time being, employers should review this ruling to make sure they adjust their payroll and tax practices to recognize same-sex marriages for federal tax purposes, even if they operate in a state that does not recognize these marriages.
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