The IRS has released a streamlined procedure for recovering FICA taxes withheld on the pay of same-sex married couples in cases where benefits (typically health insurance) were counted as taxable income to an employee.
Under tax law, employer-provided health insurance is considered a tax-free benefit as long as the insurance covers the employee, the employee’s spouse or the employee’s dependent.
Because of the Defense of Marriage Act, couples in a same-sex marriage were not considered married for federal tax purposes, so any benefits provided to a same-sex spouse were NOT tax free but were instead counted as taxable wages. The benefits were subject to both income taxes and FICA taxes.
Employees can get refunds of withheld income taxes by filing an amended tax return. Getting back the FICA taxes is trickier and generally involves action on the part of the employer. The IRS has released guidance (found in Notice 2013-61) for employers on how to recover FICA taxes, including streamlined procedures to simplify the process.