The IRS and Department of Labor Issue Guidance, Including Tax Concerns, on DOMA Ruling

28 Oct The IRS and Department of Labor Issue Guidance, Including Tax Concerns, on DOMA Ruling

Recently, the Supreme Court ruled that the word “marriage” refers to a legal union between a couple of opposite sex. However, the Internal Revenue Service (IRS), the U.S. Department of the Treasury, and the Employee Benefits Security Administration (EBSA) division of the U.S. Department of Labor (DOL) have since released clarification of the specific implications regarding an employee benefit plan.

The guidance released by these official entities basically says that same-sex couples who are legally married in states that recognize same-sex marriage will be treated as married for federal tax purposes. The guidance goes on to say that the couple does not have to currently live in the state where they were married in order to receive this benefit. Instead, the IRS will recognize same-sex marriages based on the “state of celebration”. These changes took effect on September 16, 2013.

The laws do not pertain to those who are simply living together even as registered domestic partners or in a civil union. They must show that they were legally married in a state that recognizes same-sex marriage, but they do not have to be currently living in that state.

This is good news for some same-sex couples, as they will now be able to receive the same tax breaks as a traditional married couple gets on their tax return. The EBSA has said that it intends to issue further guidance on the implications of this ruling in future correspondence. They plan to address specific provisions of ERISA and its regulations.

The Treasury, IRS and EBSA have all now adopted the “state of celebration” rule instead of the “state of residence” requirement. Experts believe that this consistent approach will be helpful, because the EBSA and IRS each have important oversight roles with respect to the ERISA plans. All employer benefit plans that are required by federal law, such as health, retirement and spousal protection are included in these rulings.

Employer and Tax Benefits

Many same sex couples are now traveling to states that recognize same sex marriage in order to obtain these employer and tax benefits. Employers are understandably confused by some of the language in the rulings and uncertain about whether they should grant same-sex couples similar benefits as married couples.

Call a Professional Accountant For Your Tax or Business Concerns

The professional accountants at Avalon Accounting are available to help individuals and small business owners understand what these changes will mean for them. Even human resources and payroll department experts are unsure of how these changes will affect their day-to-day affairs. This is a great time to get all the details about how these new changes might affect your company. Call to schedule an appointment with an accounting professional at Avalon.