The Internal Revenue Service recently clarified the steps needed for same-sex spouses to claim a refund of taxes paid, if one spouse included the other spouse in a healthcare plan, and the employer’s contribution for that coverage was reported by the employer as income. The couple must be lawfully married under state or D.C. law in order to claim the refund.
In a letter from the IRS to Vermont Rep. Peter Welch, the IRS indicated that if an employer included the value of a spouse’s healthcare coverage as an item of income on the employee’s Form W-2, the employee should ask the employer for an amended Form W-2 excluding that amount of income. Spousal healthcare coverage by an employer is not taxable to the employee. Using the amended Form W-2, an amended Form 1040 should be filed claiming a refund for the excess taxes paid.
If the employer refuses to issue an amended Form W-2, the employee can complete Form 4852 and check the box indicating the employee received an incorrect Form W-2. The employee should then subtract the value of the healthcare coverage from gross income and report the adjusted amount on Line 7 of Form 4852. The employee can then determine the correct tax on the modified amount of taxable income, and file an amended Form 1040 requesting a refund.
If the increased wages were also subject to Social Security tax, i.e., if the increased wages were below $113,700, then a refund for excess Social Security taxes can also be claimed by filing Form 843, including all attachments listed in the instructions for Form 843.
A tax refund may be claimed if a tax form claiming the refund is filed within three years after the date the original tax return is filed or within two years after the date the tax was paid, whichever is later. Generally, April 15 of the following year is considered the payment date, regardless of when the tax return was filed. Therefore, refunds could be claimed for the 2012 through 2014 tax years if employers included the value of spousal health insurance in the employee’s income during any of those years. Copies of the relevant forms may be found at www.irs.gov.
Additionally, as highlighted in a recent case filed in District Court in Massachusetts, tax savings may be found by filing amended tax returns for prior years with the “Married Filing Joint” filing status if a “single” or “head of household” filing status had previously been used. The lawsuit challenges the constitutionality of the Defense of Marriage Act (DOMA) and alleges unequal treatment as compared to similarly situated opposite sex married persons. See Horowitz & Vigorito v. United States, Civil Action No. 1:14-cv-12839 (D.C. Mass. 7/2/2014). IRS Revenue Ruling 2013-17 states that for federal tax purposes, the IRS will recognize a marriage of same-sex individuals. To be valid, the marriage must have been entered into in a domestic or foreign jurisdiction whose laws authorized same-sex marriages, even if the couple resides in a jurisdiction that does not recognize same-sex marriage. Thus, the tax refund claimed in this lawsuit should be forthcoming without the need for extended litigation.
The contents of this article are intended for general informational purposes only and should not be considered legal advice. This is part of a series of monthly articles by Jackson & Campbell on legal issues of interest to the LBGT community. Jackson & Campbell is a full-service law firm based in Washington with offices in Maryland and Virginia. If you have any questions regarding this article, contact Nancy O. Kuhn at 202-457-1621 or firstname.lastname@example.org. If you have any questions regarding our firm, please contact Don Uttrich, who chairs our Diversity Committee, at 202-457-4266 or email@example.com.