Small Business Tax News
This regulation is now under IRC Section 409(a). The employees had until December 31, 2008 to make their elections for compensation to be received in 2009.
In the first year in which a participant is eligible to participate in a plan, they may make an election within 30 days after the date of eligibility, but only with respect to compensation earned subsequent to the election. In addition, in the case of any performance-based compensation covering a period of at least 12 months, a participant may make an election no later than six months before the end of the covered period.
A plan may allow a participant to elect to delay a scheduled distribution from a plan if the new election is made at least 12 months in advance and delays the distribution at least five years. Within the five years, a premature distribution may only be made on account of death, disability or unforeseeable emergency.
A plan may permit the acceleration of a payment in only a few circumstances listed below.
- To pay employment taxes imposed on compensation deferred under the plan
- To comply with a domestic relations order
- To pay income taxes due upon a vesting event under a plan subject to IRC Section 457(f)
- To comply with a conflict-of-interest divestiture requirement (see IRC Section 1043)
- To reflect inclusion in income under IRC Section 409(a)
- To terminate a participant’s interest in a plan:
o Where the payment is not greater than the elective deferral limit under IRC Section 402(g)(1)(B) ($15, 5000 in 2008, $16,5000 in 2009)
o In the 12 months following a change in control event
o Where all arrangements of the same type are terminated
o Upon a corporate dissolution or bankruptcy
- To end a deferral election following an unforeseen emergency
A nonqualified deferred compensation plan is retroactively taxable to the participant as of the time of the initial deferral. In addition to the normal income tax on the compensation, the participant must pay an additional 20-percent tax, as well as interest at a rate 1 percent higher than the normal underpayment rate. *For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
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Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous best selling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications. For more information and additional articles on these subjects, visit www.vebaplan.com, www.taxlibrary.us, lawyer4audits.com or call 516-938-5007.
The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
IRS
| Even plan administrators pleaded for help, but thousand of people got IRS audits, fines and penalties anyway. |
| See an excerpt from an email by a plan administrator frustrated with IRS activities below |
To: Everyone I know!
It could be you.
I am a Third Party Administrator and am asking for your help. One of my clients with 4 employees who simply funded
a retirement plan with $500,000 recently endured a 5.5 year IRS audit of his 412 (i) pension plan. Upon completion
of the audit the client owes $55,000 in income taxes for 2004-2006 and has refunds from 2007-2008 of $55,000
(timing difference only) He owes about $30,000 in blackmail money (He really should owe nothing!). The SBSE
income tax agent has threatened to assess $800,000 in penalties under Code Section 6707a. The IRS is far
exceeding their authority in assessing the 6707a penalty this is totally prosecutorial abuse. WE must put a stop to
this! My client cooperated and acted in good faith and did file the form 8886 (Maybe not 100% correctly but none
the less, he did file the necessary forms).……
Dennis Cunning
It could be you.
I am a Third Party Administrator and am asking for your help. One of my clients with 4 employees who simply funded
a retirement plan with $500,000 recently endured a 5.5 year IRS audit of his 412 (i) pension plan. Upon completion
of the audit the client owes $55,000 in income taxes for 2004-2006 and has refunds from 2007-2008 of $55,000
(timing difference only) He owes about $30,000 in blackmail money (He really should owe nothing!). The SBSE
income tax agent has threatened to assess $800,000 in penalties under Code Section 6707a. The IRS is far
exceeding their authority in assessing the 6707a penalty this is totally prosecutorial abuse. WE must put a stop to
this! My client cooperated and acted in good faith and did file the form 8886 (Maybe not 100% correctly but none
the less, he did file the necessary forms).……
Dennis Cunning
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| Call 516 935-7346 |
| Call 516-935-7346 |
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