The IRS has issued Notice
2013-61, which outlines special administrative procedures for
employers to use to correct overwitholdings of income taxes and
overpayments of payroll taxes for 2013 and prior open tax years with
respect to employer-provided, same-sex spousal benefits. This
guidance supplements Revenue Ruling 2013-17, which clarified that
under the U.S. Supreme Court's decision in U.S. v.Windsor,
the IRS will recognize all legally-married, same-sex couples for
federal tax purposes, regardless of where the couple lives. (See the Alert
of 9/5/2013 for further details.)
Correction Methods for
2013. Notice 2013-61 offers the
following alternatives for employers that have treated the value of
same-sex spousal benefits as compensation on their Forms 941 for the
first three quarters of 2013:
may correct overwithholding and overpayments for the first three
quarters of 2013 on the fourth quarter's Forms 941 if employees
are reimbursed for overwithholdings and overpayments by December
that do not reimburse employees for the overwithholdings and
overpayments by December 31, 2013 may file one Form 941-X for
the fourth quarter of 2013 to correct FICA overpayments for all
quarters in 2013. This alternative allows employers to avoid having
to file separate Forms 941-X for each quarter of
Under the second
alternative, however, employers cannot make an adjustment for income
tax overwithholding. Instead, employees will receive a credit for the
overwithholding when they file their 2013 federal income tax returns.
Correction Methods for
Prior Years (2010 through 2012).
For calendar years 2010 through 2012, Notice 2013-61 authorizes
employers to file a single Form 941-X for the fourth quarter of the
applicable year to correct for FICA overpayments made in any or all
quarters of that year.
While Notice 2013-61 allows
employers to file only one Form 941-X to correct overpayments, it
does not relieve employers of their obligation to file Forms W-2c (to
allow employees to correct their prior income tax returns), obtain
written consent from affected employees, and reimburse employees for
Procedural Issues. The special administrative procedures provided
in Notice 2013-61 are optional and are intended to relieve filing and
reporting burdens associated with the retroactive application of
Revenue Ruling 2013-17. Employers may still use standard procedures
for correcting income tax overwithholding and FICA overpayments.
All Forms 941 and Forms
941-X filed pursuant to Notice 2013-61 must include the name
"WINDSOR" in dark, bold letters across the top of page one
to alert the IRS that the forms are related to adjustments in
response to Revenue Ruling 2013-17.
Recommendations. In consideration of the guidance provided by
Notice 2013-61, employers are advised to determine any income taxes
that were overwithheld in 2013 and make the necessary corrections on
the fourth quarter 2013 Form 941. Employers should also consider
whether it would be more advantageous to simply file refund claims
for prior years or to take a credit.
IRS Notice 2013-61 is
accessible at: http://www.irs.gov/pub/irs-drop/n-13-61.pdf.