The Treasury Department issued Revenue Ruling 2013-17 on August 29, 2013, providing for treatment of same-sex couples legally married in one state as married for all federal tax purposes. This position removes doubt following the US v. Windsor decision as to whether the Internal Revenue Service would treat same-sex couples differently in states where same-sex marriages are not recognized.
This Ruling clears the way for employers to seek a refund of social security and Medicare taxes (FICA) paid on qualified benefits which were treated under DOMA as excludible only with respect to opposite sex spouses and dependents. For example, same-sex couples could not exclude the value of employer-paid health care coverage, certain tuition benefits or group-term life insurance premiums from their gross income and wages, yet amounts were excludible from the wages of married couples of the opposite sex. As a result, the imputed value of these and other qualified benefits were subject to FICA and income taxes.
Subject to the applicable three-year statute of limitations, the Ruling allows for employers to seek a refund of FICA taxes paid on the imputed value of qualified benefits. The Treasury Department announced separately that future guidance will be provided describing specific streamlined procedures employers must follow to perfect their claims for refund. FICA tax refunds have special requirements. Employers need to act now to (1) ensure qualified benefits are coded properly in payroll systems to ensure exclusion where appropriate (2) notify affected employees of the FICA refund opportunity and (2) identify the payroll data required for filing claims. It is anticipated that IRS guidance will provide a specific template and transmission method for these claims.