NY issues withholding, MCTMT guidance on same-sex marriages

The New York Department of Taxation and Finance has issued notices concerning personal income tax withholding and metropolitan commuter transportation mobility tax (MCTMT) issues affecting same-sex married individuals and their employers.

Withholding. The department advises that same-sex married employees may want to file a new Form IT-2104, Employee's Withholding Allowances Certificate, with their employer because they will file a New York return using a married status beginning in tax year 2011. Employees should provide proof that they are legally married to have the employer stop withholding New York tax on the value of certain benefits (e.g., domestic partner health care coverage). This applies if the employee's federal taxable wages subject to withholding include the value of the benefits, and the value of these benefits would not be included in taxable wages if provided to a different-sex married spouse.

Employers should not withhold New York tax on certain benefits provided to a same-sex married employee. An employer does not need to withhold tax for state, New York City, or Yonkers income tax purposes on the value of certain benefits (e.g., domestic partner health benefits), even though it is subject to federal withholding. This applies if the employee's federal taxable wages subject to withholding include the value of the benefits, and the value of these benefits would not be included in taxable wages if provided to a different-sex married spouse.

Employers should continue to use the rules described in Publication NYS-50, Employer's Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax, for reporting state and local wages on federal Form W-2. The withholding notice also discusses the reporting of annual wage totals on Form NYS-45, Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return.

MCTMT. For payrolls paid on or after July 24, 2011, the MCTMT notice advises employers to reduce their payroll expense by the value of certain benefits (e.g., domestic partner health benefits) provided to a same-sex married employee who is a covered employee. This only applies when the value of these benefits, if provided to a different-sex married spouse, would not be subject to Social Security tax.

For tax years 2011 and after, to compute net earnings from self-employment allocated to the metropolitan commuter transportation district (MCTD), same-sex married self-employed individuals (including partners) must recompute the federal income tax return as if they had been able to use a married filing status, including net earnings from self-employment. Such individuals must apply all of the federal rules for married taxpayers.

Taxpayers should apply the $10,000 threshold after they recomputed net earnings from self-employment allocated to the MCTD. In addition, if a taxpayer makes estimated tax payments, the estimate should be recomputed based on a married filing status. The notices are available at http://www.tax.ny.gov/pit/marriage_equality_act.htm . ( Notices, New York Department of Taxation and Finance, July 21 and August 4, 2011 .)

Source: http://hr.cch.com