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IRS Issues Special Guidance for Payroll Tax Refunds

The U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act earlier this year, effectively resulting in the recognition of same-sex marriage for purposes of federal law and regulations.  Since then, the IRS has announced that they will recognize all legal same-sex marriages, and will do so on a retroactive basis.

The IRS recently issued special guidance that is intended to simplify the process of employers applying for a refund of Federal Insurance Contributions Act (FICA) taxes and federal income tax withholding paid with respect to benefits provided to same-sex spouses.

In short, IRS Notice 2013-61 allows employers to use the 2013 fourth quarter Form 941 to correct for overpayments of FICA and income tax withholding made during 2013 (including with respect to imputed income paid on employee benefits).  Further, for tax years prior to 2013, employers can file one Form 941-X to claim a refund or adjustment for all four quarters of the calendar year (generally employers must file a Form 941-X for each calendar quarter).   Employers may, but are not required, to use the relief provided in the Notice.

Employers may also apply for refunds of Federal Unemployment Tax Act (FUTA) and Railroad Retirement Tax Act (RRTA) taxes, but no special procedures are necessary because the returns for those taxes are filed annually.