Not a Member? Get access to HR news and resources that you can trust.
Change can be scary, but deploying new HR software doesn't have to be.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
Register by March 3 and save $425! Join us in Chicago, IL – April 24-26, 2017.
On June 27, 2014, the IRS released
Information Letter 2014-0012, which contains guidance for employees who have had the value of same-sex spousal coverage under employer health plans—which until recently was required to be included in gross income—reported on their Forms W-2.
Historically, the employer cost of opposite-sex spousal coverage under employer-provided health plans is tax free (Treasury Regulations section 1.106-1), while the employer cost of same-sex spousal coverage resulted in taxable income to the employee. Further, the employee cost of opposite-sex spousal coverage could be paid for on a pre-tax basis through a cafeteria plan (I.R.C. section 125), while same-sex spousal coverage could only be paid for with after-tax dollars.
In its June 2013
United States v. Windsor decision, the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (DOMA)—which had prohibited the recognition of same-sex couples as spouses for federal tax law purposes—unconstitutional. Thereafter, the IRS issued guidance providing that same-sex spouses who were lawfully married under the law of any state—regardless of where those same-sex spouses resided—would be treated the same as opposite-sex spouses for federal tax purposes (Revenue Ruling 2013-17).
Subsequent IRS guidance clarified the tax treatment of the employer cost and the employee cost of same-sex spousal coverage: the former would not result in taxable income to the employee and the later could be paid on a pre-tax basis through a cafeteria plan (Notice 2014-1).
Information Letter 2014-0012
Information Letter 2014-0012 outlines two possible correction methods for an employee who has had the value of same-sex spousal health coverage reflected on a Form W-2:
Option One: The employee can ask the employer for a corrected Form W-2—that does not include the value of any excludable spousal health coverage in taxable wages—and use the corrected Form W-2 when filing the employee’s tax return.
Option Two: If the employer does not issue a corrected Form W-2, the employee can complete Form 4852 (Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) pursuant to the instructions contained the Information Letter and file it with a completed Form 1040 and the uncorrected Form W-2.
The Information Letter also advises employees that they may be entitled to a refund of federal employment taxes (social security and Medicare) paid on the value of excludable spousal health coverage and provides two possible refund methods: an employer-sought refund and an employee-sought refund via Form 843 (Claim for Refund and Request for Abatement).
Key Take Away: Significantly, Information Letter 2014-0012 does notrequire employers to issue corrected Form W-2s or seek a refund of federal employment taxes. Accordingly, considerations of payroll department workload and employee relations can determine whether issuance of a corrected Form W-2 or the seeking of a refund is appropriate. Payroll departments who have not already done so should ensure their Form W-2 reporting and federal employment tax withholding aligns with
Windsor and subsequent IRS guidance.
Stephanie O. Zornis Of Counsel in the St. Louis office of
Jackson Lewis, a labor and employment law firm. © 2014, Jackson Lewis P.C. All Rights Reserved. Reposted with permission.
SHRM Seeks Clarification on DOL Proposed Rule Defining ‘Spouse,’SHRM Online Legal Issues, August 2014
More Post-Windsor Tax Guidance: IRS Issues Letter Outlining Steps for Individuals to Obtain Tax Refunds for Same-Sex Spousal Health Coverage, Proskauer’s ERISA Practice Center Blog, July 2014
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies