The IRS recently issued Notice 2013-61 to provide the procedures for employers to make claims for refunds or adjustments of overpayments of FICA and federal income tax withholding for certain benefits provided to same-sex spouses after the Supreme Court's decision in US v. Windsor.
Prior to the Supreme Court's decision in US v. Windsor, a same-sex spouse was not recognized as a spouse under federal tax law, which meant that for certain employee benefits offered to a same sex spouse were not treated as excludable from the employeeʼs gross income for federal income tax purposes. As a result, employers withheld income tax and paid employment taxes from an employee's wages for the benefits provided to the same-sex spouse of the employee. In Revenue Ruling 2013-17, the IRS concluded that same-sex couples legally married in jurisdictions that recognize such marriages will be treated as married for federal tax purposes, regardless of their state of residence, and that taxpayers may rely on the Ruling (subject to limitation periods) retroactively for purposes of filing original returns, amended returns, adjusted returns or claims for credits or refunds of overpayments of taxes with respect to employer-provided health coverage or fringe benefits that were excludable from income based on an individual's marital status. Notice 2013-61 provides two alternative special administrative procedures for adjustments and claims for these refunds or credits for 2013.
- Under the first alternative, an employer can repay its employees for the overpayment of FICA and income taxes with respect to same-sex spouse benefits by December 31, 2013 and use the fourth quarter 2013 Form 941 (Employer's QUARTERLY Federal Tax Return) to correct overpayments paid in the first three quarters of 2013.
- Under the second alternative, an employer that does not repay its employees for the overpayment of FICA and income taxes with respect to same-sex spouse benefits by December 31, 2013 can file a Form 941-X (Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund) for the fourth quarter of 2013 to correct the overpayment of FICA taxes for all quarters of 2013.
For overpayments of FICA taxes for years before 2013, employers can make a claim or adjustment for all four quarters of a calendar year on a Form 941-X filed for the fourth quarter of such year, assuming the refund period remains open.
The administrative procedures in Notice 2013-61 are optional, and an employer may still use the regular procedures for correcting employment tax overpayments to correct the overpayment of taxes for benefits provided to same-sex spouses.