The IRS, DOL and the Treasury recently ruled that, effective Sept. 16, 2013, same-sex couples must be recognized as married for federal tax purposes if such marriage was valid under state law, regardless of whether the couple resides in a state that has legalized or recognizes same-sex marriage. This ruling comes almost three months after the Supreme Court’s decision to strike down Section 3 of the Defense of Marriage Act, which defined “marriage” as a legal union between members of the opposite sex and defined “spouse” as an individual of the opposite sex for purposes of all federal laws.
The ruling applies to any same-sex marriage that was legally performed in any one of the 50 states, the District of Columbia, a U.S. territory or a foreign country. Legally married same-sex couples must now file their 2013 federal tax returns using either a “married filing jointly” or “married filing separately” filing status. Same-sex couples who were legally wed prior to the issuance of the ruling may file tax returns for prior tax years if they wish to be treated as married for federal tax purposes for those years, as long as the returns are still considered open under the relevant statute of limitations. Because the statute of limitations for filing a refund claim is the later of three years from the date the return was filed or two years from the date the tax was paid, same-sex, legally wed couples can generally choose to file amended returns for the 2010, 2011 and 2012 tax years.
Accordingly, employers that sponsor group health plans should:
- Stop imputing income on the value of premiums paid for same-sex spouses and adjust income tax withholdings for amounts already withheld in 2013;
- Allow employees to make pretax contributions through cafeteria plans for their same-sex spouse’s share of group health plan premiums;
- Claim refunds or adjustments for the overpayment of the employer portion of Social Security and Medicare taxes paid using the special administrative procedures now available under IRS Notice 2013-61 for years before 2013;
- Allow employees to use their dependent care assistance program (“DCAP”) accounts on a pretax basis to cover expenses incurred for the care of the dependents of same-sex spouses;
- Modify plan procedures to permit reimbursement of qualified medical expenses, including flexible spending accounts (“FSAs”), health savings accounts (“HSAs”) or health reimbursement accounts (“HRAs”), to pay for their same-sex spouse’s medical expenses on a tax-free basis;
- Provide same-sex spouses the opportunity to elect to continue their health coverage under COBRA if employees lose coverage in a manner that would give rise to a COBRA obligation; and
- Permit same-sex spouses to enroll in their group health plans if an employee or the employee’s same-sex spouse has a special enrollment right under HIPAA.