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IRS ISSUES NEW RELIEF FOR DEFERRED COMP PLAN MISCUES

December 04, 2007

The misbegotten deferred compensation rules of Sec. 409A have created an insatiable demand for relief from its complex and punitive provisions. The IRS issued the newest installment yesterday (Notice 2007-100).

The notice mostly allows service providers to fix operational foot faults under Sec. 409A; without such relief, even minor and inadvertent failures to follow the letter of these stupid rules can impose income tax AND a 20% penalty on the deferred compensation balances of anywhere from one employee to an entire class of employees.

Tax Analysts discussed the new notice with a former IRS attorney ($link):

Small mistakes that are caught and addressed in tax years before 2010 can be fixed, he said, and most other mistakes get relief if they are caught by the end of the year. He said that he expects many people to be disappointed with the notice because many minor plan errors made in ignorance will go undetected for years.

The only way to provide truly effective relief for Sec. 409A is to repeal it. That's up to the same Congressional blockheads who enacted it.

Related: IRS DELAYS SUBSTANTIVE REQUIREMENTS FOR 409A

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