Tax Laws Change for Deferred Compensation

In 2008 Congress and the IRS adopted new rules in regards to taxation of deferred compensation. Deferred compensation is money earned in one year but paid in another. Examples include stock options, executive retirement plans, bonuses, salary reduction arrangements and bonus deferral plans. This tax law change has significant impacts on many executive pay packages. The IRS is requiring that deferred compensation amounts be included immediately in an employee's income. An additional penalty tax may also be owed, which is equal to 20% of the deferred compensation amounts. ,

My employment lawyer contact said this rule should be carefully followed, and companies should evaluate their compensation policies in light of the new tax law.

I looked up several sites for guidance on this. The IRS site has a lot of information for you. For a simple write up about it, I found Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim LLP's site to have good information. I don't have any connection with that law firm, but found their information easy to understand and similar to other sites I reviewed.