Following up on my prior posts (links below) on employers who gross up the pay of gay and lesbian employees to compensate them for the additional federal taxes owed on benefits provided to their partners: New York Times, Yale Payroll Error Gives Gay Employees a New Year Surprise:
Imagine that your employer sent you a letter just before Christmas informing you that it failed to withhold the proper amount of income to cover your 2010 tax bill, and would begin deducting that extra amount from your paycheck right after New Year’s.
That’s what happened to 61 employees with same-sex partners at Yale University, in New Haven, Conn., which made an inadvertent payroll error that will mean thousands of dollars in extra taxes withdrawn from paychecks of many of these workers this year.
Many same-sex couples are all too familiar with the extra financial costs and complications that can arise because their marriages are not recognized by the federal government. Living in a state where these marriages are recognized, like Connecticut, doesn’t always make their financial lives any easier since couples are subject to two sets of tax rules: they’re considered “married” for tax purposes on their state income tax returns, but not on their federal returns.
This is the issue that tripped up the payroll system at Yale. A programming error failed to withhold income for taxes owed on the value of domestic partner health coverage.
Prior TaxProf Blog coverage:
