News & Events

IRS Releases Special Procedures for Employers to Seek Refunds of Taxes on Same-Sex Spouse Benefits

Submitted By Firm: Bond, Schoeneck & King, PLLC

Contact(s): Louis P. DiLorenzo, Thomas G. Eron

Author(s):

Mark Burgreen

Date Published: 10/16/2013

Article Type: Legal Update

Share This:

The Internal Revenue Code ("Code") excludes from an employee’s income the value of certain employer-provided benefits that cover or are provided to the spouse of the employee. Section 3 of the Federal Defense of Marriage Act ("DOMA"), however, prohibited the IRS from recognizing same-sex spouses under the Code. Thus, until recently, the value of benefits provided by an employer to the same-sex spouse of an employee generally had to be treated (for federal income tax purposes) as additional wages paid to the employee.

On June 26, 2013, the United States Supreme Court, in United States v. Windsor, ruled that Section 3 of DOMA was unconstitutional. (For a more detailed discussion of the Windsor decision, see our July 2013 Employee Benefits Law Action Memo.) Since Windsor, several pieces of IRS guidance have addressed how the IRS will implement the decision. In Revenue Ruling 2013-17, the IRS held that individuals of the same sex who are lawfully married under the laws of any State will be treated as spouses for federal income tax purposes, even if the same-sex couple currently resides in a State that does not recognize same-sex marriages. Employees who are lawfully married to a person of the same sex will no longer be required to recognize income (for federal income tax purposes) equal to the value of certain benefits provided to the employee’s same-sex spouse. In addition, because the Windsor decision has retroactive effect, the IRS also indicated that employees who previously paid federal income taxes on the value of benefits provided to their same sex spouses can seek refunds of those taxes by filing amended individual tax returns for open tax years (generally 2010, 2011 and 2012, as applicable).

In Notice 2013-61, the IRS provided special administrative procedures that an employer may follow to correct the employer’s overpayments of FICA taxes and federal income tax withholding on same-sex spouse benefits. Generally, employers file an IRS Form 941 to report FICA tax paid and income tax withheld for each calendar quarter. A Form 941-X is used to correct overreported taxes for each calendar quarter. In Notice 2013-61, the IRS pointed out that employers may still use the regular Form 941-X procedure for overpayments relating to same-sex spouse benefits. However, to reduce administrative burden, the IRS provided alternative procedures for employers to use for taxes attributable to same-sex spouse benefits (including taxes on premiums paid for health plan coverage, remitted tuition benefits, dependent care benefits and other fringe benefits).

For 2013 overpayments, the IRS provided the following two alternative procedures for employers:

  1. If an employer repays or reimburses (against subsequent wages) employees for over-collected FICA taxes and income tax withholding for same-sex spouse benefits for the first three quarters of 2013 by December 31, 2013, then the employer may make a corresponding reduction to the FICA wages and income taxes withheld for the first three quarters of 2013 on its fourth quarter 2013 Form 941.
  2. If an employer does not repay or reimburse employees for over-collected FICA taxes and income tax withholding for same-sex spouse benefits by December 31, 2013, then the employer may file one Form 941-X for the fourth quarter of 2013 to correct FICA taxes for all quarters of 2013. However, under this option, an employer cannot make adjustments for over-withholding income taxes in 2013. Moreover, to use this option, an employer must satisfy the regular Form 941-X filing requirements, including repaying or reimbursing employees for over-collected FICA taxes (or securing employee consents to file claims on their behalf), and obtaining statements from employees providing that they will not also claim a refund of over collected FICA taxes. Finally, the employer must write "WINDSOR" in dark, bold letters at the top of the Form 941-X.

The IRS also provided an optional procedure for overpayment of FICA taxes in years before 2013. The procedure is similar to alternative number 2 above. That is, an employer may file one Form 941-X for the fourth quarter of each prior open tax year to correct FICA taxes for all four quarters of that year. (No adjustment can be made for over-withheld income taxes.) Further, in addition to satisfying the regular Form 941-X filing requirements, including repaying or reimbursing employees, obtaining required statements (and consents, if applicable) from employees and writing "WINDSOR" at the top of the form, the employer must also file Forms W-2c, which reflect employees’ corrected wage and tax amounts. Employers may file a Form 941-X and Forms W-2c for prior tax years still open under the statute of limitations, which are generally tax years beginning in 2010, 2011, and 2012.

The deadline for filing a Form 941-X is the later of three years from the date the original Form 941 was considered filed (Forms 941 are considered filed on April 15th of the succeeding calendar year if filed before that date), or two years from the date the taxes reported on the Form 941 were paid. For 2013 Forms 941, this means that the deadline is April 15, 2017, or, if later, two years from the date the taxes reported on the Forms 941 were paid.

Conclusion

Employees and employers that have paid income and employment taxes attributable to benefits provided to an employee’s same-sex spouse may now seek refunds or adjustments for those taxes. Refunds and adjustments should generally be available for tax years beginning in or after 2010. Employees seeking refunds of income taxes will have to file amended individual tax returns for prior open years. Employers seeking adjustments/credits may take advantage of the special procedures described above and should be cognizant of the year-end deadline described in the special procedure applicable to 2013.

Find an Employment Lawyer

In all 50 U.S. states, every Canadian province, and over 135 countries. View or print a complete ELA member list by clicking here.

Find an Immigration Lawyer

Facilitate employee transfers around the globe. View or print a complete ELA member list by clicking here.

International Background Checks Summaries

Your free resource summarizing the requirements for pre-employment checks around the world.

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel  

Loading...