ExecutiveLoyalty.org

Tax Withholding and FICA

General Reference:

• "When Are RSUs 'Deferred Compensation' for FICA Purposes?" (Cohen Buckman Alert, 2020.07.20). Analyzing IRS Chief Counsel Memo (2020.05.22).
  
• "How Special Is the Special Timing Rule? Analyzing the Timing of FICA Taxation in Nonqualified Deferred Compensation Plans" (Georgia State Law Review, 2018.02.21) - excellent analysis.
• "Nonqualified Deferred Compensation Reporting and Withholding" (Aon authors, spring 2018, Journal of Deferred Compensation).
• Treas. Reg. 1.3121(v)(2)-1
  • 201​7.01.13  IRS Says No Closing Agreements re NQDC.  Per the IRS in AM2017-001: "As a policy matter, since regulations exist which govern and contain methods for the correction of NQDC reporting failures, it is not appropriate to enter into a closing agreement in situations where employers did not timely take NQDC into account for purposes of FICA for taxable years which are statutorily barred from assessment."
    

Professional Employer Organizations

• 2017.02.01  Common Law Employer Held Liable for Unpaid Employment Taxes Despite Paying PEO. In Chief Counsel Memo 201724025, the IRS found that the "usual" PEO did not succeed to an employer's liability for employment taxes because the PEO was not obligated to pay wages and employment taxes without first receiving sufficient funds from the employer. Unfortunately, despite having paid those amounts to the PEO, the employer retained liability when the PEO failed to pay. This decision highlights the significant trust relationship - and need for diligence - anytime an employer outsources its payroll and benefits to a PEO. Those arrangements can work well, but the PEO needs to be well recommended and regularly monitored - with its services agreement being carefully reviewed to assure the employer understands the risks- and establishes protections against them.

Stock Awards

• 2016.08.18  NYSE Amends Stock Plan Rules.  In the wake of FASB changing its  accounting rules to provide companies with the flexibility to withhold taxes from taxable stock award events (such as vesting or exercise) at a rate above the minimum, the NYSE has revised its equity plan FAQs to confirm that an amendment to allow the maximum tax withholding is not a material amendment. See Q&A C-1.