The IRS recently published Notice 2013-61, which provides guidance for employers to make claims for refunds or adjustments of overpayment of FICA taxes and employment taxes (federal income tax withholding) with respect to certain benefits and compensation provided to same-sex spouses. This guidance follows up on Revenue Ruling 2013-17, which announced the IRS's position that same-sex couples who are legally married in states that recognize their marriage will be treated as legally married for federal tax purposes. Our earlier article about Rev. Rul. 2013-17 can be found here.
Rev. Rul. 2013-17 applies prospectively from September 16, 2013, and retroactive application is optional. Notice 2013-61 provides special procedures for employers to correct overpayments of FICA and employment taxes for 2013 and prior open years with respect to same-sex spouse benefits. For example, employees who covered same-sex spouses under group health were required to pay premiums on an after-tax basis before September 16, 2013, and an employer may want to recover overpayments with respect to these amounts.
To reduce administrative burdens, the IRS provided two alternative special procedures for adjustments for 2013. First, an employer that pays or reimburses employees for overcollected FICA and employment tax withholding for the first three quarters of 2013 on or before December 31, 2103 may make corrections on its fourth quarter 2013 Form 941. This method allows an employer to avoid filing separate Forms 941-X to correct the first three quarters of 2013. Second, an employer that does not repay or reimburse employees on or before December 31, 2013, and thus files its fourth quarter 2013 Form 941 without making an adjustment, may correct FICA overpayments for all of 2013 by filing Form 941-X for the fourth quarter of 2013.
Finally, the IRS also provided a special procedure for open years before 2013. Under this procedure, an employer may file one Form 941-X for the fourth quarter of the applicable prior year, including the adjustments or refunds for all overpayments with respect to same-sex spouse benefits provided during such year.
Employers that provide benefits to same-sex spouses should consider whether they want to correct for FICA taxes and employment taxes for periods before September 16, 2013. Those employers that wish to do so should consult with their payroll service providers.