As reported in our October 2006 Client Alert, Notice 2006-79 postponed the regulatory effective date for the Section 409A regulations from January 1, 2007, to January 1, 2008. The final regulations are currently under review and are being circulated for approval among senior IRS and Treasury officials. Unfortunately, this process encompasses timing uncertainty and offers the potential for significant delays. Thus, final regulations may not be issued until December or next year. Before the regulations are finalized, however, the IRS is expected to publish a new Section 409A Notice, dealing with reporting and disclosure. Last year on December 8th, the IRS issued Notice 2005-94, suspending the reporting and withholding requirements with respect to Section 409A for calendar year 2005. We anticipate that within the next week to month, the IRS will issue a new Notice again suspending part of the reporting requirements.
A requirement that nontaxable deferrals be reported annually on Forms W2 was added by Section 409A, but has yet to be implemented. Apparently it will again be deferred for another year. However, it is expected that this Notice, unlike Notice 2005-94, will require employers to report any amounts taxable under Section 409A and to apply the appropriate withholding. It is further expected that the new Notice will provide some guidance on valuation issues connected with the requirement of withholding, but that the guidance will not be comprehensive in scope.
For general information about Section 409A, please click here.
If you have any questions, please contact Marla Aspinwall at (310) 282-2377.
This client alert is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.
Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.