On September 23, the Internal Revenue Service released Notice 2013-61, which provides special rules for those making claims for refunds or adjustments of Federal Insurance Contributions Act (FICA) taxes and federal employment taxes resulting from the Supreme Court’s decision in United States v. Windsor, 133 S.Ct. 265 (2013).
The Windsor decision found that Section 3 of the Defense of Marriage Act, which restricted the federal government from recognizing marriages between two individuals of the same sex that were otherwise valid for state law purposes, was unconstitutional. Based on Windsor, the IRS recently announced in Revenue Ruling 2013-17 that the determination of whether a couple is married for federal tax purposes will be based on whether the marriage was legal where it was performed.
Prior to Windsor, an employer that made benefits available to the same-sex partners of its employees was required to impute the value of the benefit as income to the employee, and then withhold and pay FICA and employment taxes based on that imputed income amount. However, as a result of Revenue Ruling 2013-17, employers need no longer impute income for those employees with same-sex partners that are validly married.
By its terms, Revenue Ruling 2013-17 has a retroactive effect to all open tax years (currently, this would typically include 2010, 2011 and 2012). As a result of Windsor and Revenue Ruling 2013-17, employers are now entitled to recover FICA and employment taxes previously paid by employers on imputed income for validly married employees. Such recovery would typically involve the filing of amended quarterly returns for each affected period. Notice 2013-61 eases the process of recovering those overpayments of FICA and employment taxes by allowing employers to file one annual amended return for each year (including 2013).
Notice 2013-61 gives employers two optional methods to correct 2013 overpayments. The first correction method allows an employer to use its 2013 fourth quarter quarterly tax return (IRS Form 941) to correct any overpayments made during the first three quarters of 2013. The second correction method allows an employer to file one amended employer’s quarterly tax return (IRS Form 941-X) for the fourth quarter of 2013 to correct overpayments of FICA taxes for all four quarters of 2013.
Notice 2013-61 also provides an optional correction method for an employer to use for overpayments of FICA taxes that an employer may have made for years before 2013. Specifically, it provides that, rather than filing a Form 941-X for each calendar quarter for which a refund or adjustment needs to be made, an employer may file a single Form 941-X for each calendar year for which a refund or adjustment is desired.
Notice 2013-61 concludes by stating that the special rules are optional. If an employer desires to use regular procedures for correcting employment tax payments instead of the special administrative procedures (e.g., submitting amended returns for each quarter), the employer may still do so.
A copy of Notice 2013-61 is available here.