Internal Revenue Code Section 409A - Document Revisions Needed

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Pryor Cashman partner Christopher Sues and associate

Mathew Young have authored a Legal Update entitled

?Internal Revenue Code Section 409A ? Document

Revisions Needed.?

Congress implemented Internal Revenue Code Section

409A on October 22, 2004, as part of the American Jobs

Creation Act of 2004. Essentially, Section 409A limits the

flexibility employers have as to timing in designing and

paying deferred compensation by tightening the rules and

imposing penalties for failure to follow those rules. The

penalties for failing to comply with Code Section 409A are

substantial, including immediate taxation of the deferred

income, an additional tax of twenty (20%) percent imposed

on the individual recipient, not the payor, plus interest and penalties (not to mention possible state level taxation).

The Internal Revenue Service (?IRS?) published final

regulations for Code Section 409A on April 17, 2007. The

effective date of the regulations is January 1, 2009. In the

update, Sues and Young discuss those regulations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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