IRS Issues Post-DOMA Guidance - State Tax Issues Continue

Tax Professionals' Resource
September 11, 2013 — 1,797 views  
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There is good news for all same-sex couples. A recent guidance issued by the Internal Revenue Service has made same-sex couples eligible for all the plan and tax purposes of the country. This includes taxation of dental, medical and vision benefits. This guidance was issued by the IRS as a result of the judgment passed by the Supreme Court that took down the central Defense of Marriage Act (DOMA).

This latest guidance treats every legally married couple in the country or state equally, irrespective of the marriage being same-sex or opposite-sex.

The Good and the Bad of the Latest IRS Guidance

The new regulation states that the IRS should uniformly administer all of its laws and should not put an excessive burden on the taxpayer or the Service itself. It should also acknowledge that the policies and rules being adopted by it should try to avoid bringing in any sort of administrative difficulties. One of the partners of the employee benefits team of the boutique law firm Caplin and Drysdale, Joanne Youn, said that this guidance will help in putting forward only those rules that are suitable for IRS in administering its tax laws.

A recent survey was done on this matter by International Foundation that looks after the Employee Benefit Plans. Around sixty five percent of the employees mentioned that they required further guidance and clarification on the decision of the Court on the matter of DOMA. They said that further assistance on this topic will help them in making better and suitable changes in their present employee policies and benefits.

One of the partners of the employee benefits practice of the international law firm, McDermott, Will & Emery, Todd Soloman, said that employers are likely to welcome this federal change. But he also cautioned that there may be some state tax problems which may lead to some difficulty in admitting the benefits for same-sex couples. He added that it is still not vey clear as to how exactly states will handle the same-sex partner benefits. The major concern is the treatment of the guidance in the states where same-sex marriages are not yet allowed.

Youn recommends that to get the best of this guidance, employers need to create a record of all their benefits under this plan. She suggests that employers should also review all the related plan specifications and document forms. These newly formed rules only apply to marriages. They are not applicable on any other kind of relationships like registered domestic partnerships or civil unions.

Tax Professionals' Resource