IRS and DOL Guidance Clarifies Post-DOMA Questions

by Goodwin
Contact

As discussed in Goodwin Procter’s July 8, 2013 Employee Benefits Update (the “July Update”), the U.S. Supreme Court’s ruling in the Windsor case that struck down Section 3 of the Defense of Marriage Act (“DOMA”) introduced numerous implications for retirement, health and other employee benefit plans.  Recent guidance from the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”) clarify certain aspects of the Windsor ruling’s implementation.

Background

On June 26, 2013, in U.S. v. Windsor, the Supreme Court struck down as unconstitutional Section 3 of DOMA, which provided that only opposite-sex marriages would be recognized as valid for federal law purposes. As a result, individuals who are spouses in a same-sex marriage that is recognized under applicable state law are considered to be married when applying federal statutes and regulations that refer to or involve marital status. As noted in the July Update, the Windsor ruling left a number of unanswered questions in the absence of further guidance.  

State Law Recognition

The Windsor ruling did not specify whether a same-sex couple that is recognized as married in one state would continue to be considered married for federal law purposes if such couple moved or returned to a state that does not recognize same-sex marriage.

Revenue Ruling 2013-17 issued by the IRS, as well as Technical Release 2013-04 issued by the DOL, clarify that same-sex couples that are legally married in jurisdictions that recognize their marriages will be treated as married for purposes of federal tax rules and ERISA regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage. This guidance also clarifies that same-sex couples who have entered into a registered domestic partnership or other civil union, but who are not married, will not be treated as married for these purposes. The IRS and the DOL indicated that they intend to issue further guidance in this area in the future.

Qualified Retirement Plans

Qualified retirement plans must comply with Windsor and the IRS guidance as of September 16, 2013. The IRS has not yet issued any guidance regarding the applicable of Windsor to qualified retirement plans for periods before September 16, 2013 or the timing of any required plan amendments.

Retroactive Individual Federal Income Tax Claims

Revenue Ruling 2013-17 also provides retroactive relief with respect to individual federal income and employment taxes, permitting same-sex couples who would have qualified as married to file amended returns as a married couple and related claims for credits or refunds for tax years that are still open under the statute of limitations. The ruling requires that all items reported on an amended return that are affected by marital status be adjusted to be consistent with the amended return’s reported marital status.

Retroactive Claims by Employers

The Frequently Asked Questions released in connection with the ruling also provide that in addition to individuals seeking credits or refunds for past returns, employers may claim refunds for excess employment (i.e., Social Security and Medicare) taxes paid (e.g., with respect to imputed income for family health coverage). The IRS provided specific guidance in Notice 2013-61 for employers claiming refunds for excess employment taxes.  The notice permits two special administrative procedures for correcting overpayment of employment taxes that result from an employer’s retroactive application of Revenue Ruling 2013-17.

Alternative 1 for 2013

Under the first alternative, employers may use the employer’s fourth quarter 2013 Form 941 to correct overpayments of income and employment taxes for the first three quarters of 2013. Employers must repay or reimburse the employees the amount of the over-collected income and employment taxes on or before December 31, 2013.

Alternative 2 for 2013

Under the second alternative, if an employer has not repaid or reimbursed the employee-paid portion of the over-collected employment taxes on or before December 31, 2013, such employer may file one Form 941-X for the fourth quarter of 2013 to correct overpayments of employment taxes for all quarters of 2013. With respect to the employee-paid portion of the tax, the employer must repay or reimburse the over-collected employment taxes prior to filing the amended form, and further must secure the employee’s written statement confirming that the employee has not made, and will not make, any separate claims for refund or credit of the over-collected employment taxes.

Guidance for Years Prior to 2013

Similarly, for each tax year prior to 2013 for which the applicable statute of limitations has not expired, employers may file one Form 941-X to cover all excess employment taxes paid for all four quarters of such year, provided that, with respect to the employee-paid portion of the tax, the employer has repaid or reimbursed the employees over-collected employment taxes prior to filing the amended form, and further provided that the employer has secured the employee’s written statement confirming that the employee has not made, and will not make, any separate claims for refund or credit of the over-collected employment taxes. Normally employers would need to file a Form 941-X for each quarter for which a refund claim or adjustment is made.

Employers who claim a refund or credit of employment taxes are also required to file Forms W-2c, Corrected Wage & Tax Statement. If they follow the special administrative procedures described above in filing Form 941-X, they should write “WINDSOR” in dark, bold letters across the top margin of page 1 of Form 941-X. Only corrections made under the special administrative procedures may be shown on the form marked with the Windsor case name.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.