How to Treat Same-sex Spouse Health Premiums Wrongly Included in W-2 Income

Posted on Wed, Jul 09, 2014 ©2021 Drucker & Scaccetti

The IRS has recently issued Information Letter 2014-0012, advising same-sex couples how to properly treat health insurance premiums wrongly included in their W-2 income.


In general, an employee can exclude from income the cost of employer-provided coverage under an accident or health plan for the employee, his or her spouse and dependents. Pre-Windsor, a same-sex spouse was not considered a spouse under federal law, and therefore any coverage provided to the employee’s same-sex spouse was taxable income to the employee (commonly known as “imputed income”). However, the Windsor decision and subsequent IRS guidance, which provide that a married same-sex spouse will be treated as a spouse for federal tax purposes, have made this exclusion available to same-sex couples.


While many couples and their tax advisers are aware of these law changes, which affect 2013 tax returns and W-2’s, employers have been slow to react. This guidance provides same-sex couples with clear procedures for correctly filing their income tax returns and taking advantage of the income exclusion in cases where they receive incorrect W-2’s. There is additional guidance on the proper way to claim a refund for improperly collected payroll taxes as well.


For more information on imputed income, including refund opportunities from prior years and a sly tax deduction available for self-employed unmarried partners, see our previous LGBT Marriages & Taxes Blog, Imputed Income for Partner Health Benefits. To review your specific situation with our dedicated LGBT Tax Consulting & Financial Planning Team or ask us a specific question, give us a call at 216-665-3960 or send an e-mail via the "Ask A Tax Warrior" button below.


Topics: employee, Same-sex spouse, health insurance, premiums, W-2 income, Windsor case, Health plan, imputed income, Federal tax

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