Retroactive Marriage Status Allows FICA Benefit Refunds

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By Michael Trimarchi

Same-sex couples in Illinois and other states can file amended federal returns to claim federal income tax and Federal Insurance Contributions Act refunds for benefits if they had retroactively elected to have a civil union recognized by the state as a marriage, an Internal Revenue Service official said Aug. 7.

Employers that sponsor qualified plans offering same-sex benefits may file for refunds of FICA taxes, which employers were required to withhold from imputed income for health-care benefits for same-sex spouses.

“An interesting twist in the Illinois marriage law, which took effect on June 1, 2014, is that it allows an individual in a civil union to make an election by May 31, 2015, to convert that civil union to a marriage and have the marriage considered in effect retroactive to the date of the civil union,” said Scott Mezistrano, IRS representative for industry stakeholder engagement and outreach.

Mezistrano, addressing the issue during a monthly teleconference between the IRS and payroll industry representatives, said a couple in a legal civil union in Illinois can make a retroactive election as married, allowing them to be considered married as far back as June 1, 2011, when civil unions became legal in Illinois, he said.

Although the IRS has made clear that it does not recognize civil unions for purposes of taxation, the agency does recognize marriage for taxation purposes, he said.

The changes started taking place a year ago after the Supreme Court ruled that the Defense of Marriage Act (Pub. L. 104-199) violated the constitutional guarantee of equal protection when applied to same-sex couples legally married under state law (United States v. Windsor (U.S., No. 12-307, 6/26/13)).

Other states have similar for retroactive-election policies, Mezistrano said.

According to Bloomberg BNA reference sources, these states also allow civil unions to be converted to marriages after same-sex marriage became legal: Connecticut, Delaware, New Hampshire and Rhode Island.