7806akp Posted April 7, 2011 Report Share Posted April 7, 2011 An employer intended for its deferred compensation plan to be a 457(f) plan, but no substantial risk of forfeiture was built into the plan. Employer and employees believed the plan allowed the taxation to be deferred to a later year, so the amounts were not taken into gross income in the year deferred, even though there was no substantial risk of forfeiture. This error occurred over 5 years, so the 3-year statute of limitations has run with respect to a few affected tax years. When should the amounts be taken into gross income with respect to tax years for which the SOL has already run? Two theories: 1. Include in gross income in the year the money is distributed from the plan; or 2. Include in gross income in the first year for which the period of limitation has not run. In other words, if the period of limitations is still open with respect to Years 3, 4 and 5 of the failure (but is closed for Years 1 and 2), report all amounts deferred under the plan for Years 1, 2 and 3 in Year 3. Does anyone know how to handle this situation? Link to comment Share on other sites More sharing options...
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!Register a new account
Already have an account? Sign in here.Sign In Now