IRS Starts Interpreting New Deferred Comp Law
The Internal Revenue Service has published its first batch of guidance for taxpayers who are trying to comply with the new Internal Revenue Code Section 409A. The section sets complicated new rules for determining when taxpayers can and cannot defer certain types of compensation from taxable income.
Congress included the section when it approved the American Jobs Creation Act of 2004.
The IRS is emphasizing that the first round of guidance, which includes answers to 38 questions, is just the start of its effort to interpret and implement IRC Section 409A.
“The Treasury Department and the Internal Revenue Serviceintend to incorporate the principles of this notice into additional, more comprehensive guidance in 2005,” writes Stephen Tackney, an IRS tax-exempt entities specialist, in IRS Revenue Ruling 2005-1.
Tackney warns taxpayers against basing Section 409A positions on unrealistic expectations about what the IRS might decide in 2005.