Same-Sex Couples: Answers to Federal Tax Questions
Same-sex Couples: Answers to Federal Tax Questions
In June 2013, the U.S. Supreme Court ruled that the federal Defense of Marriage Act (DOMA), which limited marriage to opposite-sex couples for purposes of federal law, was unconstitutional. As a result of this ruling, same-sex marriages must be recognized on the same terms as opposite-sex marriages for purposes of federal law, including tax laws.
After the court's decision, the Internal Revenue Service (IRS) issued answers to frequently asked questions (FAQs) for same-sex couples. These FAQs are available at: www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples.
The tax rules can be complex. If you need assistance understanding the information from the IRS in this article, please speak with a tax advisor.
When are individuals of the same sex lawfully married for federal tax purposes?
For federal tax purposes, the IRS looks to state or foreign law to determine whether individuals are married. Same-sex couples who are legally married in jurisdictions that recognize their marriages will be treated as married for federal tax purposes. This rule applies regardless of whether the couple lives or works in a jurisdiction that recognizes same-sex marriage or not, to ensure uniformity in application of the federal tax laws. The IRS rule for recognizing same-sex marriages is called the “state of celebration” approach.
Example: A same-sex couple lives in a state that does not recognize same-sex marriage. They marry in a different state that has legalized same-sex marriage. The couple is treated as married for federal tax purposes.
Can same-sex spouses file federal tax returns using a married filing jointly or married filing separately status?
Yes, although the rules will differ depending on the tax year of the return and when it is filed.
Tax Year 2013 and Beyond
For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status. This rule applies to all same-sex couples who are legally married, even those who live in states that do not recognize same-sex marriage. For information on filing an amended return, see Tax Topic 308, Amended Returns, at www.irs.gov/taxtopics/tc308.html.
If an employer provided health coverage for an employee’s same-sex spouse and included the value of that coverage in the employee’s gross income, can the employee file an amended Form 1040 to recover the federal income tax paid on that coverage?
Yes, for all open tax years. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later.
If an employer provided health coverage for an employee's same-sex spouse, the employee may claim a refund of income taxes paid on the value of coverage that would have been excluded from income had the employee's spouse been recognized as the employee's legal spouse for tax purposes. This claim for a refund generally would be made through the filing of an amended Form 1040.
Example: Employer sponsors a group health plan covering eligible employees and their dependents and spouses (including same-sex spouses). Fifty percent of the cost of health coverage elected by employees is paid by Employer. Employee A was married to same-sex Spouse B at all times during 2012. Employee A elected coverage for Spouse B through Employer's group health plan beginning January 1, 2012. The value of the employer-funded portion of Spouse B's health coverage was $250 per month.
The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee A included $3,000 ($250 per month x 12 months) of income reflecting the value of employer-funded health coverage provided to Spouse B. Employee A filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2. Employee A may file an amended Form 1040 for the 2012 taxable year excluding the value of Spouse B’s employer-funded health coverage ($3,000) from gross income
Yes, for all open tax years. If an employer sponsored a cafeteria plan under which an employee elected to pay for health coverage for the employee on a pre-tax basis, and if the employee purchased coverage on an after-tax basis for the employee’s same-sex spouse under the employer’s health plan, the employee may claim a refund of income taxes paid on the premiums for the coverage of the employee’s spouse. This claim for a refund generally would be made through the filing of an amended Form 1040.
Example: Employer sponsors a group health plan as part of a cafeteria plan with a calendar year plan year. The full cost of spousal and dependent coverage is paid by the employees. In the open enrollment period for the 2012 plan year, Employee C elected to purchase self-only health coverage through salary reduction under Employer’s cafeteria plan. On March 1, 2012, Employee C was married to same-sex spouse D. Employee C purchased health coverage for Spouse D through Employer’s group health plan beginning March 1, 2012. The premium paid by Employee C for Spouse D’s health coverage was $500 per month.
The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee C included the $5,000 ($500 per month x 10 months) of premiums paid by Employee C for Spouse D’s health coverage. Employee C filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2. Employee C’s salary reduction election is treated as including the value of the same-sex spousal coverage purchased for Spouse D. Employee C may file an amended Form 1040 for the 2012 taxable year excluding the premiums paid for Spouse D’s health coverage ($5,000) from gross income.
In the situations described above, may the employer claim a refund or make an adjustment of income tax withholding that was withheld from the employee with respect to the benefits in prior years?
No. Claims for refund of overwithheld income tax for prior years cannot be made by employers. The employee may file for any refund of income tax due for prior years on Form 1040X, provided the period of limitations for claiming a refund has not expired.
Yes. If the period of limitations for filing a claim for refund is open and the employee has not been reimbursed by the employer for the FICA taxes and has not authorized the employer to file a claim for refund of those taxes on his or her behalf, the employee may claim a refund.
The employee should seek a refund of FICA taxes from his or her employer first. However, if the employer indicates an intention not to file a claim or adjust the overpaid FICA taxes, the employee may claim a refund of any overpayment of FICA taxes by filing Form 843, Claim for Refund and Request for Abatement. The requirements for an employee filing a claim for refund of the employee portions of FICA taxes can be found in the Instructions for Form 843. Employees should write “Windsor Claim” in dark, bold letters across the top margin of Form 843.
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Source: Internal Revenue Service