Tax season is upon us again and although the process is slowly becoming more streamlined for married same-sex couples, there are still some additional things to consider when filing your 2014 income taxes and, possibly, amending prior year returns. Last year, the IRS issued an Information Letter which provided married same-sex couples with guidance and instructions regarding how to file their income tax returns as to properly exclude health insurance premiums incorrectly included in their gross income on their W-2 forms.
Before the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act unconstitutional in the 2013 case, United States v. Windsor, 570 U.S. 12, 133 S. Ct. 2675 (2013), same-sex spouses were not considered “spouses” as defined by the federal government. As a result, even if the couple’s marriage was recognized in their home state, for federal income tax purposes, health insurance premiums paid on behalf of the spouse of the employee were includable in the employee’s income. This is known as “imputed income”.
Following the Windsor case, the IRS issued guidance making it clear that all spouses of married employees are to be treated as “spouses” for federal income tax purposes. While many employers and their payroll departments complied immediately, some 2013 W-2 (and possibly 2014) forms were issued with health insurance premiums included in gross wages, incorrectly. Information Letter 2014-0012 gives tax payers the guidance and instructions they need to correctly exclude the health insurance premiums incorrectly included in their gross wages from their income tax returns. Because most employers are not issuing corrected W-2 forms for same-sex couples for years before 2013, the Letter is also helpful to those who need to file amended federal income tax returns.
Please review the Information Letter using the link above for instructions and always speak with an accounting professional when preparing and filing your taxes. Emily Towne McNeil is an attorney at Vaughn-Martel Law and focuses her practice in estate planning and probate administration.