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IRS Releases Initial Guidance on Same-Sex Spouses
08/29/2013

We have been anticipating guidance from the IRS on the treatment of same-sex spouses for tax and benefit purposes in light of the Supreme Court's overturning of DOMA, and here it is.

Married Anywhere. Rev. Rul. 2013-17 (here) says that a same-sex couple validly married anywhere (including in a foreign country) will be recognized as married for federal tax purposes, even if their marriage is not recognized under the law of their home state. In other words, it’s a state-of-celebration rule, not a state-of-residence rule.

All Tax Purposes. The rule applies for all tax purposes, including employee benefits. So in addition to filing joint tax returns, same-sex spouses may obtain tax-free coverage for each other under health or cafeteria plans and are entitled to spousal rights under 401(k) and other qualified retirement plans. Also, medical expenses incurred by one spouse in a same-sex marriage will qualify for reimbursement from a flexible spending account or health savings account maintained by the other spouse. Recognition of the same-sex marriage may present an issue for participants in dependent care assistance plans, because the spouse's income and employment must now be taken into account.

Retroactivity. Individuals in existing same-sex marriages may go back and claim a refund for taxes on any imputed income that resulted from coverage of a same-sex spouse or children of a same-sex spouse under a health or cafeteria plan. Employers may also be able to obtain refunds of employment taxes imposed on imputed income. The refunds are limited to years for which the statute of limitations is still open (generally the last three years). FAQ guidance (here) provides additional information on claiming tax refunds.

Retirement Plan Questions. There is a significant retroactivity concern for retirement plans that may have made distributions to participants with same-sex spouses without obtaining spousal consent or otherwise extending spousal rights. The IRS has indicated that further guidance on this issue will be coming. That guidance is also expected to outline a timetable for making any required plan amendments to ensure same-sex spouses are extended appropriate spousal rights under retirement plans.

Not Domestic Partners and Civil Unions. The rule only applies to marriages, not domestic partnerships or civil unions. A same-sex couple that is recognized as a domestic partnership or civil union would not be treated as married for tax or employee-benefit purposes, unless they are actually married under the law of some jurisdiction.

 


Editors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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