Correcting Employment Tax Overpayments in Same-Sex Marriage Cases

As of 9/23/13, there is new IRS guidance regarding correcting employment tax overpayments in same-sex marriage cases.  Effective 9/16/13, the IRS had announced that same-sex couples, married in any jurisdiction legally recognizing the marriage, would be treated as married for federal tax purposes.

This directly affects employment tax returns for the third quarter of 2013.  If an employer withholds employment taxes related to same-sex spouse benefits in 2013 Q3, and if the employer reimburses those taxes before filing third quarter Form 941, those wages/taxes should not be reported on Form 941 for Q3.  If the employer does not reimburse those taxes before filing third quarter Form 941, there are special administrative IRS procedures for 2013 that the employer can use to make an adjustment or claim a refund for the overpayment.

Employer Filing Options

The IRS is offering two options for employers that have treated the value of same-sex spouse benefits as wages on Form 941 for Q1, Q2 and Q3 of 2013 who now need to correct overpayments of employment taxes related to those benefits.

Option 1 - Repay the Employee

The first option allows for an employer to repay employees the amount of FICA and FIT that has been withheld related to the same-sex spouse benefits for Q1, Q2 and Q3 of 2013 by 12/31/2013.  Then on Q4 Form 941, the employer should reduce the fourth quarter amounts for wages subject to FIT, FICA and Medicare by the amounts of the same-sex spouse benefits treated as wages for Q1, Q2 and Q3 of 2013, along with the taxes withheld and paid on those amounts. 

This way, the employer will avoid having to file separate Forms 941-X for Q1, Q2 and Q3 for 2013.  To make sure that using this special IRS administrative procedure for Q4 of 2013 does not result in a mismatch between total taxes reported on line 10 (total taxes after adjustments) and total liability for the quarter reported on line 16 for a monthly schedule depositor or on Schedule B (Form 941) for a semiweekly schedule depositor, the employer should treat the repayments or reimbursements of FICA taxes to employees during Q3 as paid on 10/1/13.

When an employer repays the employee’s FICA or FIT withholding during Q4, the repayment and the employer matching reduction in FICA should be shown on line 16 of the Q4 Form 941 or Schedule B (Form 941) on the date of the repayment.

Option 2 - Payment with Form 941-X

The second option applies to employers who do not repay employees for employment taxes related to same-sex spouse benefits provided in 2013 on or before 12/31/13, and file the Q4 Form 941 without making any adjustments.  Those employers can correct overpayments of FICA taxes with Form 941-X.  A single form 941-X for Q4 can be used to make adjustments or claim refunds or credits for overpayments of employment taxes on same-sex spouse benefits paid in all four quarters of 2013, provided the employer has satisfied the usual requirements for filing Form 941-X.  The employer should write WINDSOR in dark bold letters across the top margin of page 1 of Form 941-X.  Only corrections made under this special administrative procedure may be shown on this Form 941-X.

An employer should not make an adjustment for an overpayment of income tax withholding for a prior calendar year unless the overpayment is due to an error.  In the case of an error, employees will receive credit for the income tax withheld for purposes of determining any entitlement to a refund of income tax paid with respect to same-sex spouse benefits provided in 2013 when they file their personal income tax returns.

Help from the IRS


The IRS also announced guidance for employers who would like to make claims for credit of overpayments of employment taxes paid on same-sex spouse benefits prior to tax year 2013 for which the applicable period of limitations on credit or refund has not expired.  Employers can file one Form 941-X for Q4 of the prior year, showing the adjustments for all overpayments of employment taxes paid on same-sex spouse benefits during that year. 

Again, the employer should write WINDSOR in dark bold letters across the top margin of page 1 of Form 941-X.  Only corrections made under this special administrative procedure may be shown on this Form 941-X.  This special administrative procedure is subject to the usual requirements that apply in the case of corrections of overpayments for prior years, including the filing of Forms W-2c, repaying or reimbursing employees for overwithheld taxes, and obtaining the required written statements and consents from employees.  An employer should not make an adjustment for an overpayment of income tax withholding for a prior calendar year unless the overpayment is due to an error.

Visit the IRS website for additional information.

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